“Public companies have been taking advantage of a hot stock market by issuing shares at record pace in January,” WSJ writes.
The Rub: U.S.-listed companies have run 57 “follow-on stock offerings” in 2021 through Wednesday. It’s raised $12.35 billion. Both are records.
Notable Companies To Do So: Zoom raised $2 billion in the biggest one this year.
“The offerings coincide with voracious investor demand for stock: The S&P 500 has risen 2.6% this year, setting repeated highs after rallying 16% last year. At the same time, many biotech and pharmaceutical companies are eager to raise money for new drug candidates or vaccine research and trials.”
IPOs ran at a record rate last year: Roughly $167 billion was raised through 454 offerings on U.S. exchanges leading up to Christmas, smashing the dot-com boom record in 1999.
- SPACs alone raised $82 billion in 2020, improving more than six-fold from the year before.
- It was just as big for “follow-ons” as 862 companies raised $257.23 billion last year, the most in either since records dating back to 1995, according to Dealogic.
Look For More, Even Outside America: “The interest in issuing shares to raise money isn’t limited to U.S.-listed firms. BYD Co., a Chinese car maker backed by Warren Buffett, said this week that it raised $3.9 billion from a stock sale, the company’s largest equity financing since it listed in Hong Kong in 2002.”
This is to be expected. When valuations are high, and they clearly are this year, companies will sell more stock. This allows them to raise cash at cheaper rates, with less dilution to shareholders.