Companies That Had Their IPO in 1989: The Calm Between the Storms

The year 1989 was relatively calm in a business and global economic context, especially when juxtaposed with the tumultuous periods before and after it. Leading up to 1989, the world had been navigating through a series of significant economic challenges and geopolitical tensions. The 1980s witnessed episodes like the 1987 stock market crash and the volatility that ensued following the dramatic downturn in the markets. In summary, 1989 stands out as a year of relative calm, sandwiched between the high volatility of the mid-to-late 1980s and the brief, but impactful, recession in 1990 and 1991.

Key Insights

• Early 90s recession: 1989 was the year before the early 90s recession, with the underlying causes of the economic downturn starting to brew.

• Black Friday: The collapse of the junk bonds market caused a sharp decline in the stock market during the end of 1989.

• A cool IPO market: while the stock market had recovered, the IPO landscape was still hesitant following the volatility of previous years.

The early 90s recession was a brief, relatively mild, but impactful recession. In the United States, the recession lasted from July 1990 to March 1991, though its effects were felt before and after these dates. It was precipitated by a combination of factors, including the restrictive monetary policy adopted by the Federal Reserve to combat inflation, a sharp decrease in consumer and business spending, and the aftermath of the 1980s stock market boom. The collapse of the savings and loan industry and a slump in the real estate market also contributed significantly to the economic decline. Many of the issues that caused the recession started to rear its head in 1989 but did not come to a head fully until the following year.

The United Airlines (UAL) leveraged buyout (LBO) attempt in 1989 is a significant event in

In 1989, a group led by United Airlines' management, including its CEO Stephen Wolf, proposed an LBO of UAL, the parent company of United Airlines. The deal was valued at a staggering $6.75 billion, which would have made it one of the largest LBOs of the time. An LBO involves acquiring a company using a significant amount of borrowed money (leverage) to meet the acquisition cost. The assets of the company being acquired and those of the acquiring company are often used as collateral for the loans.

The financing for the UAL LBO was to be provided by a consortium of banks and private investors, with a substantial portion of the funding coming in the form of high-yield, high-risk debt instruments, commonly known as junk bonds. The deal was emblematic of the era's exuberant corporate finance activities, characterized by a strong appetite for leveraged deals, often fueled by optimistic market sentiments and the availability of cheap credit.

The failed UAL deal had a profound impact on the stock market, particularly leading to the mini-crash on October 13, 1989, a day that came to be known as "Black Friday." The collapse of the UAL LBO deal acted as a catalyst, triggering a sharp decline in the stock market. On that day, the Dow Jones plummeted by nearly 7%, marking the second-largest one-day percentage drop at that time, second only to the Black Monday crash of 1987. The failure of such a high-profile LBO deal eroded confidence in the market, particularly in the junk bond market, which had been crucial in financing many of the era's LBOs. Investors became acutely aware of the risks associated with highly leveraged financial structures. The collapse of the UAL deal had a contagion effect on the broader market. It led to a significant reevaluation of the value of companies that were considered potential LBO targets. As investors rushed to sell off their holdings, it resulted in widespread panic and a sharp decline in stock prices.

However, Black Friday would have nowhere near the impact that Black Monday had. While many investors were shaken by the event, its impact was brief and did not shake up the markets in the same way that the crash two years prior had done.

While the number of IPOs decreased somewhat when compared to 1988, the sentiment towards them in general was relatively positive. But while the market received the companies deciding to go public well, companies The aftereffects and general skittishness from previous years still prevailed and the number of companies going public was lower than what it had been in the mid-1980s and the years that would follow the early 90s recession.

Lattice Semiconductor had its public offering in the fall of 1989.

Genzyme had its IPO in 1989 and is today part of Sanofi. At the time of its acquisition in 2010, it was one of the largest biotech companies in the world.

The cybersecurity company Symantec had its IPO in 1989. It is today part of Gen Digital, the company that makes the Norton Antivirus suite of products (amongst other cybersecurity products and services).

The company Digi International, which produces Industrial Internet of Things products was founded in 1985 and went public just four years later.

The Spanish energy giant Repsol began trading on the Madrid Stock Exchange in 1989.

WorldCom, which would later be known as MCI, went public in 1989. It was eventually acquired and became part of Verizon.

In hindsight, 1989 is a year that stands out for the relative calm the markets displayed when compared to the years prior and the years to come. Having recovered from the volatility but with the markets being skittish and the underlying causes of the coming recession starting to become visible, companies were in many cases hesitant to go public.