Friday, November 16, 2012

Total equity offerings in the US hit an all-time record

In spite of poor performance of a number of high profile IPOs this year (won't name any names here), the demand for new issue equity in the US seems to be quite resilient. In fact the total IPO volume this year is the highest since the burst of the tech bubble.

Source: The Leuthold Group

Furthermore, if one includes the secondary stock issuance (vs. just the initial offerings), the amount of new paper hitting the market is at an all-time record this year.

IPOs plus "secondary equity financings (follow-on offerings from existing public companies), as well as secondary distributions (where proceeds go to the selling shareholders)". (Source: The Leuthold Group)

Who is buying all these shares? Except for a couple of high profile cases, individual investors don't seem to be involved on a large scale. In fact on a net basis it certainly doesn't seem to be coming from mutual funds, as investors continue to pull record amounts.

Source: The Leuthold Group

The funding for new shares seems to be coming from institutions (as well as institutional funds they invest in) that are pushed to the limit by low interest rates. Pensions and insurance firms seem to be forced to move up the risk ladder in order to meet their obligations and, as a consequence, the primary equity market may be the beneficiary.

h/t Nick Gogerty
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