Dive Brief:
- Companies raised a record $190 billion in stock sales in the second quarter as part of their effort to survive the pandemic's economic impact, a Wall Street Journal report shows.
- "We're in the face of a very resilient equity market which, combined with economic uncertainty, has led to a period of unprecedented equity issuance," Jim Cooney, head of Americas equity-capital markets at Bank of America Corp., said in the report.
- The wave started in the convertible-bond market. Bond-buying initiatives the Federal Reserve launched at the start of the pandemic helped fuel the boom.
Dive Insight:
In May alone, companies raised a record $21 billion as they took advantage of valuations and converted bonds to equity without having to sell shares at lower equities.
Companies also raised capital through large stock sales and, in late May, through a resurgence in IPOs, led by Warner Music Group, ZoomInfo Technologies and Albertsons Cos. The IPOs by Warner and Zoon raised roughly $2 billion and $900 million, respectively, the Journal reported. In June alone, companies raised just over $17 billion.
The data doesn't include the largest IPO this year — online insurance startup Lemonade, which went public July 2, just after the start of the third quarter. It sold 11 million shares at $29, giving the company a valuation of about $3.8 billion.
Deal surge
The almost $190 billion in capital companies raised dwarfs anything markets have seen at least since 1995, according to data from Dealogic.
"Investors are eager to buy stock at discounts to bolster their returns," the Journal said. Going forward, the stock resurgence is expected to continue. "Many large mutual and hedge funds [will want] to play catch-up," according to the report.
