With equity valuations at or near record levels by many measures, publicly traded corporations are racing to sell shares into the market. Karen Langley reports at The Wall Street Journal:
Public companies have been taking advantage of a hot stock market by issuing shares at record pace in January.
U.S.-listed companies have conducted 57 follow-on stock offerings this year through Wednesday, raising $12.35 billion. Both numbers are records for this point in the year, according to Dealogic data going back to 1995.
Many of the offerings have been from small pharmaceutical and other health-care firms. Also in the mix: pandemic-era videoconferencing star Zoom Video Communications Inc., ZM -1.37% which raised $2 billion in the largest such offering this year as it looks to build out its operations.
On Tuesday afternoon alone, 18 U.S.-listed companies unveiled plans for secondary or follow-on offerings, according to the financial-news organization StreetInsider.com.
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.
“There’s a tremendous appetite for equity, both U.S. and now increasingly international,” said Jerry Braakman, chief investment officer at First American Trust. “When you have such investor demand for equities and continued cash flow into the market, it’s a great time to issue—initial offerings as well as obviously secondary and follow-up offerings.”
Investors crowded into initial public offerings at a record rate in 2020. Companies raised $167.2 billion through 454 offerings on U.S. exchanges through Dec. 24, surpassing the previous full-year record for money raised that was set during the dot-com boom in 1999. The IPO market was boosted by a surge in special-purpose acquisition companies, which use money from an initial public offering to merge with another company. U.S.-listed SPACs raised $82 billion in 2020, a more-than-sixfold increase from the year earlier.
The fundraising boom extends beyond stock issuance. Corporate borrowing took off in 2020, fueled by the Federal Reserve’s response to the coronavirus pandemic, with U.S. companies breaking records for debt issuance.
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