Wave of Stock Offerings Could Signal A Market Top


In just the last two days over 14 public companies announced that they would sell $7 billion dollars of new shares into the market.

Bankers usually rush to push share issues into the market whenever they feel stocks have rallied too sharply. Might their renewed activity signal a near-term market top?

It very well could, but let’s not forget that bankers can get things terribly wrong. (Hopefully this has become pretty clear in recent years!)

They rushed to help companies sell shares into the market during May, only to see markets rally even higher.

CNBC: U.S. capital raising reached a crescendo in May 2009, the all-time busiest month in the United States for follow-on share issues, with a total of $45.3 billion, led by banks. As financial institutions stopped issuing shares, other sectors failed to step into the breach and secondary offerings dropped to $11.3 billion in August.

This week’s large follow-on offerings include Cemex, the world’s No. 3 cement maker, which plans to sell $1.8 billion of shares to pay down some of the $15 billion in debt it recently restructured to avoid defaulting.

Barrick Gold said it would issue $3 billion in stock and buy back all of its fixed-price gold hedges and a portfolio of its floating hedges. It said it will issue 81.2 million shares for $36.95 apiece.

Read more here.


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