News Article

US companies issue shares at fastest pace ever, fuelling rally

U.S. public companies sold more than US$60 billion in shares in May, the biggest monthly haul ever, as they capitalized on a stock market rally fueled by hopes that the COVID-19 pandemic is subsiding.

The benchmark S&P 500 Index has risen around 40 per cent off recent lows, reached in late-March at the height of market turmoil during the coronavirus crisis, and is now about 10 per cent short of all-time highs set in February.

The whipsawing markets hindered companies’ ability to issue new shares and raise cash, with just US$4.8 billion sold in March, the lowest monthly amount since December 2018, data showed by Refinitiv. The market has exploded back with US$22.3 billion sold in April and US$65.3 billion in May, the highest ever recorded.

The market has rocketed back with US$22.3 billion sold in April and US$65.3 billion in May, the highest on record.

The likes of cruise operator Carnival Corp and Southwest Airlines have issued new stock to raise capital. Major shareholders in businesses such as BlackRock Inc and U.S. drug manufacturer Regeneron Pharmaceuticals Inc have cashed out their stock, with the market turnaround far from certain to continue.

“We’re talking to a lot of companies around the fact that the market is here, you don’t know what lies in the economy to come,” said Ryan Parrish, head of Americas equity capital markets syndicate at Bank of America. “If you even remotely have a need you should get it done now.”

The share sales mirror a similar pattern in U.S. debt markets, where firms have raised more than US$1 trillion so far in 2020.

As in debt markets, the balance of firms selling new shares has shifted from those facing an inevitable cash crunch to those stockpiling rainy day funds.

“There are a whole host of companies that have been hugely impacted by COVID-19 and have had to recapitalize,” said Santosh Sreenivasan, head of equity-linked capital markets for the Americas at JPMorgan Chase & Co.

“Issuers that have seen their stock prices recover are now also taking the perspective that they don’t want to miss this window in case this rebound is short-lived,” Sreenivasan said.

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