Companies That Had Their IPO in 1988: A Year of Recovery

The IPO market and general market sentiment in 1988 were dominated by the fallout of the “Black Monday” crash of the previous year. While the IPO market in 1987 had been very positive leading up to the crash, the sudden panic and uncertainty introduced to the markets. Despite the initial trepidation, the IPO market in 1988 started to show signs of recovery. Companies began to test the waters, buoyed by an improving economic outlook and a gradually stabilizing stock market. While the crash had been sudden and violent, the markets began to show signs of stabilizing and recovering during the year.

• Volatile markets and cautious optimism: Even though black Monday had been violent and shocking in many ways, the markets began recovering fairly quickly.

• A sharp decline in IPOs: While the markets recovered relatively quickly the IPO landscape was still somewhat nervous.

• Globalization of the markets: The late 1980s witnessed the beginning of a trend towards the globalization of financial markets, with more and more international companies seeking listing on U.S. markets.

The recovery of the markets following the infamous Black Monday crash of October 19, 1987, showcased the resilience and inherent dynamism of financial systems. Despite the initial shock and substantial losses experienced on that day, where major market indexes plummeted and billions of dollars in value were wiped out in a matter of hours, the period that followed, particularly entering into 1988, was marked by a surprisingly rapid and robust recovery.

This rebound can be attributed to several key factors. First and foremost, the response from monetary authorities, especially the Federal Reserve, played a crucial role. In the aftermath of the crash, the Fed, led by then-Chairman Alan Greenspan, took decisive action by issuing a statement affirming its readiness to serve as a source of liquidity to support the economy and the financial system.

Investor psychology also played a crucial role. The initial panic that fueled Black Monday was partly a reaction to overvaluation and computer-driven trading strategies that exacerbated the sell-off. Once the immediate fears subsided, investors began to recognize that the economic fundamentals did not justify the extent of the market's decline. This realization, combined with attractive lower prices, encouraged buying activity, which helped in recovering the market values.

1988 brought with it uncertainties and volatility to the markets, and the number of companies going public decreased by nearly 70% compared to 1987. While the mid-80s had been a flurry of activity in the IPO market, the aftermath of Black Monday combined with various macroeconomic concerns meant that the number of companies going public drastically decreased. And as the markets recovered relatively quickly, the willingness of companies to go public did not follow suit in the same manner.

A trend that started around 1988 and continued to pick up pace in the years following was foreign companies beginning to show interest in listing on U.S. exchanges such as the NYSE and Nasdaq. This was driven by the desire to tap into the vast pools of capital available in the U.S., benefit from the prestige of being listed on these exchanges, and gain access to a broader base of potential investors. While this is nothing unusual today, with Spotify and Birkenstock being two examples of large foreign companies listed on U.S. exchanges, this was still relatively rare at the time.

The reasons for the uptick in foreign interest in U.S. listings were multifaceted. There was a significant increase in the flow of capital across borders. Investors began diversifying their portfolios internationally at an increasing rate, which was facilitated by advancements in technology and communication, making it easier to invest in foreign markets. Improvements in technology also led to a decrease in the costs associated with international transactions, including trading fees, the cost of information about foreign investments, and the expense of monitoring foreign assets.

While the IPO market cooled down significantly compared to previous years and the years that would follow 1988, there were still several notable companies that went public.

The computer and hardware manufacturer Dell had its IPO in 1988 but eventually went private in 2013. Dell Technologies, which Dell is part of, took to the public markets in 2018 following a reverse merger.

The office supply retailer Staples went public in 1988. During the mid 2010s it attempted to purchase Office Depot but was denied due to antitrust reasons, and in 2017 the company was sold to a private equity firm.

The IT services and consulting company BMC Software had its IPO in 1988. The company was acquired by a group of private equity firms in 2013 and was subsequently acquired by KKR.

One of the largest wireless carriers in the United States, U.S. Cellular, had its IPO in 1988, just five years after the company was founded. Today it is part of TDS, Telephone and Data Systems.

The broadcasting company E.W Scripps went public during the year and is today one of the largest operators of ABC affiliates (which in turn is owned by Disney) in the U.S.

All in all, the IPO landscape and general market sentiment can be described as jittery, but cautiously optimistic. Black Monday had left its mark on investors, and companies were hesitant about going public.