When it comes to the bearish red flags of the market, aggressive insider selling by corporate insiders is traditionally seen as the biggest red flag – after all, no one knows their companies’ prospects better than the people who manage them – they are closely watched by the companies selling the shares . The logic is simple: why sell today if you believe that tomorrow you can get the best price. The answer is simple: you will not do this, and instead, you are in a hurry to take profits provided by the market today.
In this case, it’s “an abundance of red flags,” because, as the following chart shows Goldman Mark Wilson, head of European stock sales, shows that companies haven’t sold so many shares in one quarter … well, forever.
According to Bloomberg, secondary offers in the US raised $ 113 billion in the second quarter, the most record. About 400 transactions in this quarter are also the most profitable.
As Goldman adds, “we are going to close another record month in the world, from June to overshadow the recent record set in May; figures (> $ 230 billion in 7 weeks) and the market’s ability to absorb this significant supply, were impressive (the world supply quota compared to previous peak periods is shown in the 1st chart; the US supply against the recent trend is shown in the 2nd chart)
In continuation of this staggering pace of stock sales, Bloomberg writes that “the record high rates of secondary offerings that consolidated in the second quarter should continue until the summer,” as sales of shares by US-registered firms and their leaders raised the most money and most often occurred in any other quarter in history.
Due to the fact that the stop of the coronavirus led to a sudden need for money, issuers found an opportunity in the stock market, which began to wave from the depth of the sale in March. The paradox, of course, is that companies are dumping stocks – with buybacks, mostly dormant – to a market dominated by (mostly young) day traders who were so eager to buy something that they almost bought a stock of useless stocks bankrupt Hertz, another unprecedented event.
And in recent weeks, activity has continued at a rapid pace. Bloomberg predicts that it promises great success in the third quarter as Covid-19 continues to destroy the economy. Convertible bond issuance also rose this quarter. These transactions amounted to more than three times the funds raised in the second quarter of 2019, as some companies that needed money sought to minimize the impact of dilution while using lower rates.
These are not just companies that have benefited from an unprecedented demand for stocks: for bankers, these deals have become a useful way to recover a business lost due to a slowdown in initial public offerings and the activity of mergers and acquisitions.
And all this, of course, was launched by the Fed, which issued trillions in liquidity, including the purchase of corporate bonds and ETFs – the Fed is now the top 5 shareholders in some of the largest bond ETFs …
Federal Reserve Now:
# 3 LQD holder
# 5 JNK holder
# 2 VCSH holder
# 5 VCIT holder
– zero value (@zerohedge) June 30, 2020
… all under the comfortable lie that it works on behalf of the US middle class.