Chronicle Journal: Finance

US companies are capitalizing on lofty stock prices by selling new shares at the fastest rate in 25 years

AMC stockIgor Golovniov/SOPA Images/LightRocket via Getty Images

Summary List Placement

Publicly listed American companies including meme-stock favorites GameStop and AMC are rushing to issue new stock, cashing in on rich valuations, according to a Wall Street Journal report.

Dealogic data cited by the Journal shows follow-on offerings — that is, new stock sale by listed firms — at 556 as of August 24, the highest year-to-date level since 1996. In terms of value, those share offerings were worth a combined $75 billion, the highest ever and up 70% since last year.

On top of GameStop and AMC, which have watched their share prices explode this year, the 556 firms that have issued fresh stock include household names like Zoom and smaller meme stocks like Plug Power. The group of companies runs the gamut in terms of underlying financials, from pandemic winner Zoom to never-profitable Plug.

"People started to take advantage of the incredible run-up in the market," Josh Weismer, head of US equity at Mizuho Americas, told the Journal. "I think we're definitely going to continue to see the follow-on market busy."

In April, before its share price took off, AMC issued 43 million shares, worth roughly $500 million at April 27 prices, though the shares were not sold all at once. Then in June, it issued another 11.6 million, right as the stock price was peaking, raising $587 million in a three-hour sale that was quickly lapped up.

"Our current market prices reflect market and trading dynamics unrelated to our underlying business," the theater chain said in an SEC filing in June. "We caution you against investing in our Class A common stock, unless you are prepared to incur the risk of losing all or a substantial portion of your investment."

Still, eager to cash in on its unprecedented valuation, AMC proposed issuing 25 million additional shares and said it would put the decision to a shareholder vote. It backed away from the vote just weeks later, following backlash from the company's devoted retail-trader base.

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