(BFM Bourse) – Aided by mountains of liquidity poured into the markets by central banks, companies raised a record $ 12.1 trillion in 2021 through the sale of stocks, the issuance of debt or the contraction of new loans.
Both on Wall Street and on European markets, the main indices are moving at unprecedented levels at the end of 2021. And while their valuations are reaching new heights, global companies have taken the opportunity to raise record amounts this year, encouraged in this sense by the unwavering support of central banks, Fed and ECB in the lead.
The logical result of the monetary authorities’ vast stimulus programs: IPOs hit a record with more than $ 450 billion raised this year in global markets, a third of which by technology groups, according to the annual report of EY.
This windfall, however, only represents a tiny part (barely 0.4%) of the financing that companies have used in 2021. They have in fact raised 12.1 trillion dollars during the past year by selling shares. , but also by issuing debt securities and contracting new loans. A few days before the end of the year, the amount of funds collected is already up by almost 17% compared to 2020, which was itself already a historic year, and by almost a quarter compared to 2019 according to the calculations of Financial Times based on data from Refinitiv.
“A real explosion”
The frenetic pace of fundraising reveals how accommodating financial conditions are in many parts of the world, including the United States, where more than $ 5,000 billion has been raised.
“The year 2021 has been a real explosion,” notes Chris Blum, a BNP Paribas banker specializing in LBOs, ie redemptions with leverage, therefore by debt. And the expert in the financing market expects that the pace will not slow down. “Each year, we think the markets will calm down a bit, but the momentum will remain robust,” he says.
Among the biggest deals of the year on the IPO front, electric vehicle maker Rivian raised some $ 13.7 billion in early November, making it one of the largest in the past five years – and this while the group backed by Amazon is just starting to sell its first vehicles. “South Korean Amazon” Coupang also raised $ 4.6 billion when it was floated on Wall Street in March, while ByteDance (TikTok) rival Kuaishou raised more than $ 6.2 billion when it floated on Wall Street. debuts in Hong Kong in February. Global equity issues thus broke the record for 2020, their volume reaching 1.440 billion dollars this year (+ 24% over one year).
Historically low borrowing costs
Favorable financing conditions have also favored a greater consolidation of certain sectors, as evidenced by several large-scale mergers and acquisitions – we can notably mention the merger of Discovery with AT & T’s WarnerMedia unit as part of a $ 43 billion deal or the $ 31 billion buyout of rival Kansas City Southern by rail operator Canadian Pacific. Dozens of 10 (over a billion) or 11-digit (over 10 billion) loans were signed in 2021, mainly in the gigantic American corporate bond market which now weighs more than 10,000 billion dollars. outstandings (i.e. the overall stock of bonds and not the funds raised this year through this), a threshold never crossed before. The loans made this year have for their part reached more than 5,000 billion.
The massive bond buying programs launched by the Fed and the ECB at the onset of the health crisis have helped push borrowing costs to historically low levels. Coupled with the vast amounts of liquidity flowing through the financial system, the environment was conducive to attracting new capital, according to bankers interviewed by the FT.
5.500 billion dollars were thus collected via the sale of corporate bonds, a figure down from 2020 (-3%) but driven by the issues of poorly rated companies, the “junk bonds”, the amount of which climbed 17% year on year to 650 billion.
Quentin Soubranne – © 2021 BFM Bourse