Companies continue to issue new equity at a torrid pace:
Markewatch: Prior to May, according to TrimTabs Investment Research, the highest level of share issuance in a given month was $38 billion. May blew that record out of the water, with a monthly total of $64 billion.
Furthermore, that blistering pace has continued during the first two weeks of June, according to TrimTabs.
The reason behind the raises is pretty clear. Every company wants to de-lever, pay down debt and give themselves a cushion. Plus, they can do it, and that may not last forever.
What’s particularly striking is what a sharp reverasal this is from 2007, when companies were buying back stock at a furious pace.
In other words, it’s more evidence that companies are terrible at trading their own stock. They buy like crazy during peaks and sell during the bottom, like retail investors with the worst sheep-like mentality. Then again, you can hardly blame them, given that back in 2007, every earnings call was filled with analysts asking about stock buybacks, while much-heralded “activist” investors pilloried management that wouldn’t lever up.
Still, given how little value this type of activity seems to create, why not just get out of the stock buyback game and let investors determine their own level of leverage? Don’t think a company is levered enough? Buy some of its stock on margin.
Meanwhile, the latest company to join the parade is E-Trade (ETFC), which rants to raise $1.2 billion (better act fast, the market’s slipping!). Its pint-sized shares are off about 13% on the news.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.