Huge stock selling wave is crushing the current bull market in U.S. stocks
Many large companies around the world are rushing to cash out, and this fundraising boom is putting pressure on the long-lasting bull market. SpaceX plans record-breaking $75 billion IPO, Parent company Alphabet raised $85 billion in equity financing, and South Korean chip company SK Hynix sold more than $26 billion worth of American depositary receipts. Investors have been cheering for years on this strong bull market -- three years and nine months, to be precise, during which the S&P 500 more than doubled. Nowadays, major companies are vying to take advantage of the high prices to raise funds, and the market is worried that the market feast may come to an end. A bull market will not collapse simply because it lasts for a long time. Even if valuations are high, it is usually not enough to destroy a bull market alone. But when the supply of new stocks is rampant and supply exceeds demand, the market will weaken. For example, from the end of 1999 to the first half of 2000, companies concentrated on large-scale additional stock issuances. Many opinions believe that this was one of the causes of the bursting of the Internet bubble. Because of this, some investors are wary of the recent concentrated issuance of stocks and bonds coupled with the shrinking scale of corporate stock buybacks. Statistics from data service provider Dealogic show that the scale of new stock financing for investors this year has reached US$344.7 billion, exceeding the total issuance in 2022, 2023, 2024, and 2025. The statistical caliber includes initial public offerings, additional issuances, and convertible bonds. "Equity issuances tend to surge at the end of a bull market," said Rob Arnott, chairman of Research Associates. The current pace of securities issuance is continuing to accelerate. Last month, SpaceX completed its listing, setting a record for the largest initial public offering in history; last Friday, SK Hynix completed a placement, setting the largest stock sale in the history of a non-U.S. company. There are still a large number of companies preparing to go public in the future, and artificial intelligence research and development companies such as Anthropic have IPO plans. At the same time, the scale of corporate stock buybacks continues to shrink, which further pushes up the total supply of stocks in the market. According to data from consulting firm Elm Wealth, net financing of U.S. corporate equity and bonds will reach $500 billion in the next year; in the past few years, thanks to large-scale stock buybacks, the U.S. stock and bond markets have experienced a net shrinkage of $1 trillion. Of course, the concentrated sale of stocks does not mean that the stock market will inevitably fall. There was a similar massive fundraising spree in 2021, when investors went crazy for shares in special purpose acquisition companies. Although a large number of SPAC projects subsequently went bankrupt, causing investors to suffer huge losses, the S&P 500 Index was not dragged down by negative sentiment that year and rose 27% throughout the year. However, concentrated selling of stocks by companies is often one of the typical signals that the bull market is coming to an end - companies will take advantage of investor enthusiasm to seize the window to raise funds. A significant change recently is that major AI hyperscale cloud services have issued stocks and bonds to raise funds for an unprecedented capital expenditure boom. According to data from Janus Henderson Investors, total capital expenditures by such companies are expected to exceed US$800 billion this year, compared with US$450 billion last year, and will exceed US$1 trillion next year. John Johnson, global head of multi-industry credit at Janus Henderson Said: "Most very large technology companies have changed their capital allocation strategies that have been carefully planned for many years. The funds used to buy back shares are now used to issue new shares." One company raised $85 billion in equity sales just in the first half of this year; It is now stuck in a position of negative cash flow. He said: "Before the arrival of the artificial intelligence wave, these companies had extremely abundant cash flow, very low debt, and their business focus was basically on stock buybacks. Now everything has changed." Some industry veterans believe that investors do not need to panic due to the surge in new share issuance and the shrinkage of share repurchases, partly because the two have limited impact on the supply and demand pattern of the entire market. After all, the total market capitalization of U.S. stocks is close to $80 trillion, and changes in the scale of securities issuance are insignificant compared to this.
Howard Marks, co-chairman of Oaktree Capital, said that it is difficult to predict when the increase in stock issuance and the cooling of buybacks will suppress the stock market. He also said that these two factors alone are basically not enough to end a bull market. James Paulson, who once served as the chief investment strategist of the Ruthold Group and currently writes a column for Substack, said: "This phenomenon reflects the overall optimism of the corporate world, and investors are unwilling to bear the market. When it develops to the extreme, this is a signal that the market is overheated."
Howard Marks, co-chairman of Oaktree Capital, said that it is difficult to predict when the increase in stock issuance and the cooling of buybacks will suppress the stock market. He also said that these two factors alone are basically not enough to end a bull market. James Paulson, who once served as the chief investment strategist of the Ruthold Group and currently writes a column for Substack, said: "This phenomenon reflects the overall optimism of the corporate world, and investors are unwilling to bear the market. When it develops to the extreme, this is a signal that the market is overheated."