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Market Backdrop: Resilience and Momentum
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Hi, this is Mike Ventura, Co-Head of U.S. Equity Capital Markets. The equity market in 2025 was defined, in my opinion, more by its agility than its fragility. We opened the year with optimism, hit all-time highs in February, and spent the next 30 trading days finding a bottom in April amidst the tariff tantrum. We were promptly back to all-time highs by mid-June.
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The market's ability to de-risk and re-risk in a period of 80 days reinforced its efficiency and highlighted investor’s ability to reduce risk without completely sacrificing upside participation. We have now registered four consecutive years of increasing annual equity issuance, and for just the second time in the last 25 years, have seen three consecutive years of 15% plus returns on the S&P 500.
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So the backdrop heading into 2026 is quite healthy. That combination of healthy market structure and performance is expected to drive a renaissance for U.S. IPOs in 2026, particularly IPOs of $1 billion in size or larger. As we've discussed before in a number of our market thought pieces, private equity clients have held assets for longer than they might have expected at time of investment,
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they've scaled those assets significantly because of the extended hold periods, and they're looking at exit sizes and valuations, that suggests an IPO exit is more advantageous than a minority sale, or the M&A path. To give some context, from now until April, there will not be a week in which an industrials IPO is not testing the waters, marketing, or pricing.
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Shifting gears from one “I” to another, let's not bury the lead around AI and all of its derivative trades, another crucial theme for the new year. Are we in an AI bubble? In the public markets, I think that's unlikely. For me, an interesting theme for the new year is around AI derivative trades such as power and utilities and industrial technology, where we expect a significant amount of issuance to support a world that is clearly net short power to support a continued AI build out.
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Last but not least, investors continue to mention the health of the consumer as a battleground topic to support differing views on the future path of the equity market. Consumer financial and physical health, spending habits, and other associated behaviors have a massive knock-on effect on the market, and I suspect, will continue to be closely watched as we turn the calendar to 2026.
ECM Market Dynamics: Structural Transformation and Investor Positioning
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Hi, this is Joe Passaro, Co-Head of U.S. Equity Capital Markets and Global Head of ECM Syndicate at RBC. Some of the major themes we saw in 2025 that we expect to continue in ‘26, from an ECM perspective, is deals getting larger. While overall ECM volumes trended up about 16% in 2025, the makeup and complexion of those deals was very different than we've seen in prior years.
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The uptick in volumes was mainly driven by IPOs up 44%, and convertible offerings up 35%, while the products that carry the majority of issuance in 2022 through ‘24 follow-ons and block trades were down about 10% in ’25. Interestingly, if we double click into those 2025 headline volume numbers, despite ‘25 total deal count trending lower than those historical figures by about 23%, the average size per deal was substantially greater, about 87% in ’25 versus the historical mean.
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Those results were most prevalent within technology, financials and healthcare, which all ranged up north of 100% over that same time period. We saw that average deal size growing substantially, particularly in IPOs. The average IPO size increased about 70%, from $300 million to about $510 million in 2025. That is mainly driven by companies going public as sponsors have taken larger and larger companies private and held them privately longer.
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The average IPO market cap has more than nearly doubled over that time frame. This was most clearly seen in Medline’s $6.3 billion successful IPO in December, where we saw an entirely new cohort of large cap investors embrace taking public a $50 billion plus market cap company. Unlike what we have seen in the majority of IPOs over the last 3 to 5 years. We believe there will be a lot more of that to come in 2026
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with a significant backlog of billion dollar plus IPOs across a wide range of sectors. As we think through how we're going to execute those large IPOs in ‘26, there'll be a clear focus on investor sentiment. Sentiment for global ECM was robust as we emerge from the April tariff lows, as investors looked for opportunities to redeploy cash that had been abruptly moved to the sidelines and were constantly chasing the V-shaped recovery that took place in the back half of the year.
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While overall markets rallied, we did hit small pockets of deal fatigue at points in the year, but in general, the demand for high-quality companies never wavered. I do believe investors who jumped headfirst back into the IPO market in ‘25 will be a touch more discerning in ‘26, as some of the names at the farthest end of the risk curve, i.e. crypto, quantum and space tech did not all fare quite as well as the median IPO outcomes.
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While we fully believe that the IPO market has completely reopened, interestingly, about 30% or 35 of the year's 122 IPOs finished the year below offer price, while 8 finished north over 100%. We believe that the quality and sector breadth that we will see in the ‘26 IPO backlog will continue to guide us towards more successful outcomes. A few things that I wanted to note,
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we pulled over 100 of our largest institutional investors at the end of 2025. Some of the notable takeaways that they are looking for will be, one, a much larger focus on growth over profitability. That was a trend that bucked from the same investors who were polled in December of ‘24, where 28% of respondents said that they were focused on growth relative to almost 60% of investors over the same time period in December of ‘25.
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Another interesting note for our corporate and sponsor clients, who may look to tap the IPO markets in 2026. We have seen a significant tightening of what investors feel as an appropriate IPO discount to public peers to enter the market in ‘26. In December of ’24, north of 75% of investors felt that discount had to be somewhere between 15 and 25%, while 40% of investors responded that 12 to 15% IPO discount would be commensurate over the same timeframe in December of 2025.
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Finally, while technology stocks have continuously been the sector most expected to one, outperform and garner the most interest from an IPO perspective, healthcare saw the largest significant jump from where they were in December of ‘25, which was very low in terms of both investor expectations of outperformance and IPOs, to number two, trailing technology, with almost 40% of investors responding that they believe healthcare has the greatest opportunity to outperform in 2026.
Technology ECM Perspectives
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Hello, everyone, this is Jesse Chasse. I lead the Tech Equity Capital Markets and Venture Capital Businesses here at RBC, and we're going to get into our outlook for the equity capital markets in tech in 2026. 2026 promises to be a pivotal year. After navigating a challenging three-year period following 2021 and experiencing a brief recovery in 2025, we are feeling exceptionally positive about the prospects ahead.
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Bigger picture, several powerful tailwinds are converging to create a compelling environment for the equity capital markets this year. I'd say first, the economy continues to show underlying strength and resilience. Inflation continues to trend lower, and we're entering a more accommodative interest rate environment. That's going to be music to the ears of growth investors and tech companies alike. On top of that, we have a supportive administration heading into the midterms, which is very likely to act as a “Trump put” in the broader markets.
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AI will undoubtedly continue to dominate market conversations in 2026, and discussions of potential bubbles and sector volatility will very likely persist. However, we believe we're entering an interesting and critical turning point where a sustainably broader set of AI companies will be demonstrating and scaling revenue growth in concrete, measurable ways. Recent years have been dominated by legitimate questions about return on investment.
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These concerns have understandably dampened investor enthusiasm for many of these companies. But 2026 represents a meaningful shift. This is when we believe tangible evidence begins to emerge. Beyond a small group of infrastructure leaders, we're now seeing app layer companies across various industries and verticals deliver sustainable revenue expansion, increased customer spending, and workflows that show substantial improvement through embedded AI capabilities.
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What was once theoretical from an ROI perspective will likely become much more tangible, reflected directly in actual financial results. This could represent a genuinely transformative moment for the AI trade and for the AI theme in the equity capital markets. Finally, we expect a wave of marquee tech IPOs in 2026. Many of these names have scaled in the private markets to levels really never seen before and are likely to create truly iconic IPO events.
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This should drive meaningful attention to the tech IPO market and is likely to provide much needed liquidity for private market investors, helping refresh and strengthen that segment of the investment life cycle, which will in turn continue to strengthen the entire tech ecosystem and value chain. The key questions were debating at the moment with our clients are, ‘How should we all think about approach and tactics for launching in a potentially crowded calendar?,”
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How can we make their story resonate amidst the noise?,” and “Will there be a point of saturation amid such a meaningful amount of supply?” Our early read is that the markets have incredible depth to absorb this supply, but it'll be interesting to watch as a theme going forward as the IPO calendar develops in 2026. So, whether you're an investor, a company in the tech space, or just someone navigating the capital markets landscape, we really believe that ‘26 is shaping up to be a year of genuine opportunity.
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The macro environment is supportive, AI feels like it's moving from hype to tangible value creation, and liquidity is turning to markets that have been relatively constrained. We're really excited for the year ahead.
Healthcare ECM Perspectives
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Hi, it's Jason Levitz, Head of Healthcare, ECM. I'd like to spend a few minutes recapping what we saw in healthcare in 2025 and what to expect this year. Although the sector finished 2025 lagging the S&P 500 for the third consecutive year, overall performance was squarely in the middle of the pack with a 12.5% gain after underperforming the market by roughly 22% in 2024.
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More importantly for our ECM business, the biotech sector posted a very strong year, up over 35% and up almost 75% from the April lows. The rebound was good news for specialist investors who enjoyed very strong performance. While we haven't seen any year end numbers yet, we expect many to show 50% plus gains on the year. Investors were focused on a few key macro themes last year and generally speaking, they worked positively for the sector.
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For one, the obesity trade continue to unfold. Eli Lilly became the first trillion-dollar market cap healthcare company on the back of its GLP-1 drug sales. There were also several large strategic transactions amidst a heightened competitive landscape. A host of new therapies in the pipeline, including new oral medications and new MOAs. In addition, the public healthcare impact should continue over the next few years.
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Also, China emerged as a major biotech innovation hub. We saw a number of global pharma companies in licensed compounds last year and expect that to continue. AI use cases in healthcare are expanding, but the sector currently has very little AI embedded value right now. There's some value creation around cost savings and streamlining business processes, but over time, we'd also expect to see more opportunities in clinical research. Areas ranging from drug discovery to more efficient clinical trial enrollment.
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Some of the perceived headwinds weren't as negative as expected last year. Heading into the year, there was a lot of focus on FDA personnel and the potential impact on the drug approval process. But, despite a lot of turnover at the agency, things ran fairly smoothly. And concerns about drug pricing, for example, and MFN didn't really hurt sector performance.
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On the financing side, it was an active year, particularly in the second half. Total healthcare issuance exceeded 56 billion, which was roughly in line with the prior year. Biotech continued to account for the majority of sector issuance. From an execution standpoint, we continue to advise our clients on confidentially marketed deals, and they were the most common marketing modality, particularly for smaller companies looking to avoid market volatility.
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We continue to see issuers use pipes to tighten execution and to focus allocations. As the market backdrop improved over the course of the fourth quarter, we saw a number of companies opt for one day public book bills to capitalize on strong stock price reactions to positive clinical data. Healthcare IPO activity last year was somewhat disappointing and tracked with the slow rebound in the asset class more generally.
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There were only seven biotech IPOs, which was the quietest year since 2009. The good news is that the median biotech IPO last year was up almost 50%, which is significantly better than the 13.9% weighted average gain for IPOs overall. Growth MedTech and tools and diagnostics also proved to be areas of strength in the IPO market last year.
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Also, private capital continued to fill the void for pre-IPO companies, again. Healthcare technology venture funding has stabilized in the 25 to 30 billion range per annum since the pandemic, and we saw biotech private funding exceed $20 billion last year. The Medline IPO, where RBC was a Bookrunner finally price last month, Medline raised about 6.3 billion in the base deal, making it the largest healthcare IPO ever, and the shares moved around 40% higher on the first trading day.
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Although Medline is unique given its size and operating history, we do expect that its success will encourage other private equity backed healthcare companies to consider IPOs this year. One other quick note regarding sponsors, we did see a pickup in public company monetization activity late in the year. For example, RBC was a bookrunner on a 90 million sale in October by J.H. Whitney and Aveanna Healthcare, which was the company's first transaction since their IPO back in 2021.
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Looking ahead to ‘26, we expect another robust issuance year and an increase in IPO activity, as many of the themes we noted in ’25 continue to play out. Healthcare policy uncertainty is front of mind as we start the year without a deal to extend the Covid era and enhance subsidies, but increasing M&A activity in particular, should continue to drive investor returns across the sector and help facilitate capital redeployment in the small and mid-cap part of the market.
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As a closing note, I'll just mention that our U.S. equity strategist recently upgraded the sector to overweight, highlighting relatively attractive valuations, good earnings momentum, and noting that healthcare has been and should continue to be a beneficiary of rotation out of the tech-AI trade.
Financial Institutions ECM Perspectives
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This is J.T. Deignan, Managing Director and Head of FIG ECM here at RBC. The single most interesting investment theme in the U.S. financial services sector in 2025 was the explosive growth of investment grade private credit, a shift that is reshaping banks, asset managers and the broader capital markets. IG private credit demand surged in 2025 as institutional investors continued to seek higher yielding assets, with lower credit risk.
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This is not just a cyclical trend. It's a structural shift in how credit is originated, distributed and owned. There are many factors behind this massive growth, but a few key drivers are yielding premium over private credit versus public investment grade bonds. Banks recalibrating their capital frameworks and in some cases, retrenching from certain types of lending altogether. But banks are partnering with private credit rather than lending directly.
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Pension funds, insures, sovereign wealth funds, allocating more private credit for stable, predictable cash flows. Private credit becoming more prevalent and financing for M&A and corporate expansion. That's a big one. So, the big question for 2026 is what will slow it down, if anything? Shifting gears, 2025, we saw 40 billion of equity capital market raised in the financial services sector, almost double the issuance versus 2024.
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Insurance remained a very busy segment of the market with seven IPOs and specialty PNC. Thematically, this last wave of specialty insurance IPOs all had very unique business lines, and we anticipate this trend to continue in 2026 as our pipeline refills. Investor engagement remains robust given the strong aftermarket performance in this asset class, further validated by strong investor participation through a heavy follow-on calendar.
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RBC was an active bookrunner in several of these high-profile insurance IPOs and follow-ons, including Accelerant’s $830 million IPO in 2025. In specialty finance BDC stepped off the gas a bit in terms of ECM activity. While we didn't have any follow-on activity, the blue-chip BDCs continued to selectively raise growth equity throughout the market programs where RBC is a market leader.
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Despite follow-on activity being nil in 2025 for business development corporations, RBC was honored to act as a lead left bookrunner for Main Street Capital's MSIF IPO, a fantastic public debut with tremendous institutional support. Not to be overshadowed by the big insurance broker deal of the year, regional banks hit the market in 2025, with 13 deals. Fueled by consolidation and regulatory capital needs, banks found ECM support from all corners of the investment community when tapping the market.
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We fully anticipate 2026 will bring further bank consolidation, coupled with an active equity capital markets calendar. As we begin 2026, investor sentiment remains positive and constructive around new capital markets opportunities. Our near near-term pipeline for deals is strong, growing, diverse, and matches up well with investor interests.
Real Estate ECM Perspectives
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This is J.T. Degnan, Managing Director, and Head of Real Estate Equity Capital Markets at RBC. As we look ahead to an active 2026, we reflect on a transitionary 2025 for real estate. While transaction activity remained measured, and the public REIT market finished essentially flat, the year delivered meaningful silver linings. Benchmark interest rates declined. Rebound spreads tightened considerably.
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Supply and demand dynamics largely remained balanced. Broader equity investor interest increased. M&A and equity capital markets activity got a shot in the arm with deal flow in sectors like healthcare, data centers, net lease, and more. And while REIT valuation sit at ten-year lows, fundamentals continue to improve in sectors that face significant headwinds throughout 2024. Office fundamentals inflected in 2025, providing investors a safer return back to the sector.
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Healthcare REITs remain the port of call in 2025, fueled by superior earnings power and a cost of capital advantage. Our real estate equity team earned the number two position in 2025 for REIT equity league tables. We were privileged to serve as a financial advisor on Sonida's $3 billion merger with CNL and exclusive advisor to Morgan Properties on a cross-border, multifamily take-private. Senior housing focused REITs were among the best performing in the REIT sector. We expect continued acquisition volumes to remain robust in 2026, resulting in even more ECM issuance than in 2024.
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Digital Infrastructure and data centers continue to be in an arms race and will continue to be in the front of minds of all investors. AI's impact on space utilization and labor markets touches all parts of the real estate ecosystem, and the lines between public and private markets will likely blur further in 2026 as deal flow increases as we go on in the year.
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Looking forward, approximately $440 billion in dry powder across real estate private equity funds combines with growing interest from nontraditional capital, in REIT take-privates, and large platform transactions, points to a more dynamic landscape ahead. Activism will likely remain a catalyst for strategic processes, while management teams increasingly focus on scale-driven revenue and cost synergies. AI's impact, again, on space utilization and labor markets, in addition to competitive positioning versus peers, are all very important boardroom discussions.
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The pendulum between private and public valuations appears to have swung too far. Best in class platforms, assets, liquidity and investment grade balance sheets at double digit NAV discounts presents a compelling opportunity. We expect these valuation gaps to narrow significantly in 2026, through increased M&A, asset sales, buybacks and improve operational fundamentals. We expect this will increase activity in equity capital markets in 2026 across some of the underserved subsectors in 2025.
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We also expect IPO activity in the REIT market to pick up in 2026. While we started to see signs of life over the last few years, it has been a dormant part of the market, with valuations, again, trading at ten-year lows, interest rates looking to be cut further, and a backdrop with fundamental support across the sector, we remain confident that equity capital market activity will be robust and will pick up where we left off in 2025.
Convertibles ECM Perspectives
00;00;00;03 - 00;00;32;20
Hi, this is Rich Duffield, Managing Director and Head of Equity-Linked Origination at RBC. The convertible market in 2025 really had a landmark year. Our market raised $117 billion of proceeds across 146 offerings. And that represented a 35% year-over-year increase versus 2024. What was equally important is deal sizes expanded significantly as well. The median deal size grew to 600 million, and a third of all offerings exceeded $1 billion.
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And this reflected a fundamental shift, larger, higher quality issuers access in the convertible market as a core financing tool. And that really is quite a seismic change in the convert market. The other key theme that we saw was volatility. And volatility was really the star performer in 2025. And it worked heavily in issuers favor. The average implied volatility climbed from 39% last year to 44% this year, and that created an optimal pricing environment for issuers.
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The higher volatility compressed coupons to historic lows and allowed issuers to achieve extremely high conversion premium, vis-à-vis historical context. Many issuers achieved significant debt cost savings versus traditional debt financing, which created significant value creation for the corporates. One of the interesting points that I think we saw in ‘25 as well was just the diversification and breadth of issuers.
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Not only did we see issuance across all sectors represented, in spite of the fact that crypto issuers dominated headlines, it was a very diverse group of issuers in 2025, and we also saw very strong participation from every credit rating, as well. Investment grade and high yield issuers both had meaningful expansion in terms of the issuance volumes as well. The convertible market is truly now a broad, multi-sector platform that appeals to issuers of all ratings categories.
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As far as investor demand, the secondary market performance was also spectacular. Convertibles returned about 17.8% in 2025, outpacing equities for much of the year. The strong aftermarket performance attracted institutional capital and truly validated the product. When investors see this type of upside participation with the downside protection of the convertible feature, you started to see significant capital inflows into the product.
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I'd be remiss not to mention mandatory convertibles as well. Seven offerings raising 9 billion in 2025, including some of the year's largest equity capital raises. These proved invaluable for issuers managing leverage profiles and capturing significant equity content from the rating agencies. As we look ahead to 2026, we expect favorable market conditions to persist. You still have the Goldilocks scenario of high volatility, high equity market valuations and significant CapEx needs from important sectors and the secular tailwinds from AI.
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We are forecasting at RBC $80 to $100 billion of issuance in 2026, which is a slight decrease vis-à-vis what we saw in 2025, but still would represent an extremely high volume of issuance in 2026. And in closing, I'd say this market has really gained broad appeal across sectors and across credit qualities. And the market backdrop continues to be extremely attractive for issuers.