- Express, Peabody, and Transocean are seeking help from equity markets amid retail-trading frenzy.
- The stocks have all rallied this year despite facing industry headwinds and debt loads.
- “Feed the ducks while they’re quacking,” one source said.
- See more stories on Insider’s business page.
Several struggling companies are following in the footsteps of AMC Entertainment and seeking help from equity investors amid the frenzy in retail trading.
The companies, including Columbus, Ohio-based clothing retailer Express, Swiss deepwater drilling contractor Transocean, and St. Louis, Missouri-based coal producer Peabody, have all announced plans to sell more shares this month, even as they grapple with industry headwinds and heavy debt loads.
The moves follow retail-trader favorite AMC Entertainment. Chief Executive Officer Adam Aron has pounced on retail-investor interest in the business in light of the company’s new status as a meme stock.
The movie-theater chain, which has flirted with bankruptcy in the past, has raised money through multiple equity offerings so far this year in an effort raise new money and shore up its balance sheet. It’s now seeking shareholder approval for another stock offering.
There’s a lot of “froth” in the market, Matt Maley, chief market strategist for Miller Tabak + Co., told Insider recently when talking about the meme-stock craze driven by retail traders on social media forums like Reddit.
This year alone, retail traders are expected to pour a net $400 billion into equity markets, topping last year’s $367 billion, and the prior two years’ net negatives, according to research from Goldman Sachs.
In light of the retail-trading frenzy, “it makes a lot of sense” for distressed companies to take capital from equity markets when possible, said Scott Hartman of asset manager Värde Partners, according to the Wall Street Journal, which first reported the story.
Steve Sosnick, chief strategist at Interactive Brokers, said a popular old phrase among investors to “feed the ducks while they’re quacking” applies, as retail investors have been clamoring for speculative stocks.
Apparel-retailer Express is planning to offer up to 15 million additional shares of its common stock. The company has rallied almost 400% this year, despite reporting a $405 million loss for 2020 after the COVID-19 pandemic shuttered storefronts.
Meanwhile, Peabody, which emerged from bankruptcy in 2017, is planning to offer up to 12.5 million shares of its common stock. The company, which has jumped more than 200% year-to-date, reported an $80 million net loss in the first quarter, as coal has become less relied upon. And Transocean, which has a junk credit rating and billions in debt, is planning on selling up to $400 million in additional shares. The stock has rallied 78% this year.
Express and Peabody did not respond to Insider’s request for comment, and Transocean didn’t provide any further comment on the article outside of the company’s filings with the Securities and Exchange Commission and its earnings call.