US Companies Issue Stocks at Highest Level in 25 Years... 227 Trillion Won in Q2 Alone

Raising Funds Through Stock Issuance Amid Economic Uncertainty

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Amid the COVID-19 pandemic, U.S. companies in need of capital are flocking to the stock market.

The Wall Street Journal (WSJ) reported on the 9th (local time), citing market research firm Dealogic, that U.S. companies raised $189.49 billion (approximately 227 trillion KRW) in funds in the second quarter alone. This is the largest amount on a quarterly basis since statistics began in 1995. WSJ explained that the U.S. Federal Reserve (Fed) entered the bond market to provide liquidity, revitalizing the financial market, and as trading of large-cap stocks became active in the U.S. stock market, companies viewed this as an 'opportunity' to secure capital.

In the second quarter, there were frequent new stock issuances and initial public offerings (IPOs) by companies. Last month, Warner Music Group and ZoomInfo conducted IPOs, raising $2 billion and $900 million respectively, while U.S. grocery company Albertsons also secured $800 million through its listing. The total IPO size in June was $17.2 billion, which significantly increased fee income for Wall Street banks. Billionaire investor Bill Ackman, founder of hedge fund Pershing Square, is also reported to plan raising $3 billion through an IPO of a special purpose acquisition company (SPAC). Software company Palantir Technologies and on-demand food delivery service DoorDash are also reportedly preparing for IPOs.

Jim Cooney, head of North American capital markets at Bank of America (BoA), explained, "The current capital market is showing signs of recovery while economic uncertainty remains," adding, "(This situation) has led to unprecedented stock issuance."

The growth trend in stock issuance and IPOs is expected to continue into the third quarter. Generally, IPO schedules tend to slow down during the summer vacation season. However, this year, concerns over a resurgence of COVID-19 in the U.S. and uncertainty about the November presidential election results lend credibility to the view that IPO demand will remain steady. The Dow Jones Industrial Average's recent rise of nearly 40 percentage points from its low also supports this perspective.

Sonu Kalra, portfolio manager of the Fidelity Blue Chip Growth Fund, said, "We can see that investor sentiment is on the rise," adding, "If volatility remains at the current level, investor sentiment will be maintained, but if volatility increases, the situation could change rapidly."