Unhedged The microcap explosion
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May 20, 2025 George Steer, a correspondent from the markets team in NYC, brings his expertise on microcaps. He discusses the surge of small cap IPOs, particularly from Chinese companies like a hot pot chain. The conversation dives into the motivations of underwriters and the implications of regulatory changes. They also explore the volatility of U.S.-China financial ties and critique the speculative nature of microcap investments. Finally, Steer shares laughs over a DJ's misstep and reflects on fashion choices at a recent event.
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Microcap IPO Boom Explained
- There is a boom in microcap IPOs on US exchanges while the large-cap IPO market remains quiet.
- Many of these microcaps come from China and represent very small businesses like noodle shops or hot pot chains.
Rule Change Sparks IPO Rush
- Nasdaq tightened IPO rules requiring companies to raise at least $15 million, causing a rush of smaller firms trying to list before the rule.
- Companies raising between $15 million and $50 million are still listing actively, sustaining the microcap IPO boom.
Chinese Microcaps Dominate US Listings
- Most of the new microcap listings on US exchanges come from China and Hong Kong, not domestic US small businesses.
- These include unusual companies like small noodle chains or clothes manufacturers attracted by deeper US capital markets.