This article is part of the FT’s Runaway Markets series.
Companies have launched a $ 400 billion fundraising campaign in the first three weeks of 2021 as the torrent of government and central bank stimulus to save global economies cascades in financial markets .
The global bond and stock fundraising frenzy marks one of the biggest gains of the past two decades for the comparable period and is about $ 170 billion above average for that period of l year, according to a Financial Times analysis of Refinitiv data.
The demand for fresh liquidity underscores how unprecedented economic interventions have helped boost financial markets despite the profound economic shock from the coronavirus and the continued spread of new virus variants.
Corporate debt and equity markets have remained unfazed as much of Europe and the United States grapples with a deadly winter wave of Covid-19, allowing business executives to use historically low and stable interest rates and to raise stock prices as a chance to grow their business and reorganize. their shareholder base or simply cash out.
“The only thing that matters to the markets is global fiscal and monetary policy,” said John McClain, portfolio manager at Diamond Hill Capital Management. “The markets are valued as if the coronavirus no longer matters.”
Firms raised $ 337 billion in debt markets in the year ending Jan. 22 and a record $ 64 billion through IPOs and secondary stock offerings. According to Refinitiv figures, the pace of fundraising in equity markets is more than double the amount raised in the same period last year, in part due to the rise of blank check companies, or Spacs.
Israeli mobile games company Playtika holds the crown of this year’s largest listing to date, raising $ 2.2 billion, according to Refinitiv, while the sale of the company’s $ 3.9 billion shares China’s electric vehicle BYD, backed by Warren Buffett, last week made it the biggest stock trade in January.
The dating app Bumble and online card retailer Moonpig are among the companies that plan to go public soon, in New York and London respectively, with bankers expecting more to follow.
Easy conditions were supported by the fierce rebound in equity markets since the steep sell-off in March. The Nasdaq Composite, home to many of America’s top tech and healthcare companies, has doubled since its March nadir.
Jeff Thomas, head of the western US quotes and financial markets at Nasdaq, described the trillions pumped into the financial system by the US Federal Reserve as a “watershed”.
“When you put all that capital into the system, it has to go somewhere,” he says. Rapidly rising stock valuations prompted companies to move from private to public markets much earlier, he added. “We’ve seen a lot of companies say, ‘Listen, let’s use valuations in the public markets to raise capital.’
In a series of articles, the FT examines the exuberant start of 2021 in global financial markets
In Asia, Chinese tech and healthcare companies are leading the fundraising frenzy. “It’s been happening for a few quarters now because China was the first to come out of the doors from a Covid recovery perspective,” said Udhay Furtado, co-director of Asian capital markets at Citigroup.
“There is clearly a favorable investment outlook for growth companies that have proven themselves to be successful with Covid,” said Alex Watkins, Co-Director of Emea Equity Markets at JPMorgan. “If you can trade well during this period, you can trade well during most reasonable periods.”
The frenzied list of Spacs also continued in 2021, despite some warnings that their growing popularity is not sustainable. Globally, 61 blank check companies have signed up so far this year, raising $ 16.9 billion and eclipsing the number of Spacs to debut in any other comparable period.
Central bank actions have also pushed companies to take on debt at cheap borrowing costs to help consolidate their balance sheets and get through extended shutdowns. Historically low interest rates have caused investors to seek income even in the riskiest parts of the market. Global high yield bond issuance for the first three weeks of January hit an all-time high for the period of $ 49.8 billion.
Meanwhile, the yield of ICE BofA’s US triple-C rated bond index, which tracks some of the riskiest debt transactions in the public market, fell to 7.6 pent on Friday, closing in on an all-time low, while investors debt.
“Investors cannot fight against global and coordinated monetary policy. It’s almost disheartening, ”said McClain, adding that“ the only place in the world that pays any kind of real return is US fixed income ”.
Some companies are capitalizing on sparkling markets to increase their debt and pay large dividends to their owners, yet another sign of investors’ thirst for deals offering relatively hefty returns.
U.S.-listed construction materials company Junk LBM issued a $ 400 million bond to fund a payment to its private equity owner Bain Capital, people familiar with the matter said. Bain declined to comment.
In Europe, Swedish whistleblower Verisure raised 2.5 billion euros in high yield bonds and paid a dividend of 1.6 billion euros to its buyout owner Hellman & Friedman, as well as to other shareholders.
A UK-based fund manager said investors were buying low-rated companies for returns despite the grim pandemic backdrop.
“Sense and feeling are just sheer nervousness surrounding the market at these levels.”