When it comes to bearish market flow red flags, aggressive selling of stock by corporate insiders is traditionally viewed as the biggest red flag – after all, nobody knows the prospects for their companies better than the people who run them – followed closely by companies selling stock. The logic is simple: why sell today if you believe you may get a better price tomorrow. The answer is simple: you don’t, and instead, you rush to lock in gains afforded by the market today.
In which case, it’s “red flags galore” because as the following chart from Goldman’s head of European Equity Sales, Mark Wilson, shows companies haven’t sold this much stock in a single quarter in… well, forever.
According to Bloomberg data, secondary offerings in the U.S. raised $113 billion in the second quarter, the most on record. The nearly 400 deals that priced this quarter are also the most ever.
As Goldman adds, “we’re about to close out another record month of global equity issuance, with June set to eclipse the recent record set in May; the numbers (>$230b of supply in 7 weeks), and the market’s ability to absorb this sizeable supply, have been impressive (the quantum of global supply vs prior peak periods shown in the 1st chart; US supply vs recent years trend shown in 2nd chart)”
Following up on this staggering pace of equity sales, Bloomberg writes that “the record-high pace of secondary offerings that took hold in the second quarter is poised to continue into the summer” as share sales by U.S.-listed firms and their top holders raised the most money and happened the most frequently of any other quarter on record.
With coronavirus shutdowns creating a sudden need for cash, issuers found an opportunity in a stock market that came roaring back from depths of the selloff in March. The paradox, of course, is that companies dumped stocks – with buybacks largely dormant – to a market dominated by (mostly young) daytraders who were so eager to lap anything up they almost bought an equity offering of worthless stock by bankrupt Hertz, another unprecedented event.
And in recent weeks activity has continued apace, with Bloomberg predicting that this promises big things for the third quarter as Covid-19 continues to rattle the economy. Convertible bond issuance also surged this quarter. Those deals amounted to more than triple the cash raised in the second quarter of 2019 as some companies needing money looked to minimize the impact of dilution while capitalizing on lower rates.
It’s not just companies that have benefited from the unprecedented demand for equities: for bankers, these deals have been a helpful avenue to recoup business lost to the slowdown in initial public offerings and M&A activity.
And all of this was, of course, started by the Fed which unleashed trillions in liquidity, including buying corporate bonds and ETFs – the Fed is now a Top 5 shareholder in some of the biggest bond ETFs…
… all under the convenient lie that it is laboring on behalf of the US middle class.
Editor, Bankster Crime
In recent weeks, many have opined – this website included – that with the US economy careening into a double dip recession (or perhaps depression), it is…Read More
We most recently described the Fed’s stealthy plan to deposit digital dollars to “each American” during the next crisis as a unprecedented monetary overhaul, but…Read More
The Comptroller of the Currency has finally handed down its punishment for the compliance failures that helped bring about an end to the tenure of…Read More
Since launching its last major international expansion push in the late 1990s, Deutsche Bank has become knonw – particularly over the last ten years –…Read More
“Digital Euro” as It Begins Experiments on Digital Currency Launch — the Banking Industry Is Very Concerned Digital Currency Will Kill the Banking Industry
As the world obsesses over Trump’s taxes or whether or not he is using oxygen during his covid hospitalization, the biggest overhaul in monetary and…Read More
This is Part 1 of a 4-part series. fi·nan·cial·i·za·tion /fəˌnanCHələˈzāSHən, fīˌnanCHələˈzāSHən/ noun The process by which financial institutions, markets et cetera increase in size and…Read More
Former Deutsche Bank AG traders Cedric Chanu and James Vorley were convicted for manipulating gold and silver prices on Friday after three days of deliberation…Read More
“An Extremely Dangerous Game” – Central Bankers ‘Extend & Pretend’ Has Increased Risk Of “Catastrophic Collapse”
In recent weeks, there has been a lot of talk about the role of the world’s central bankers going forward. With that in mind, now seems like…Read More