Post-Thanksgiving Share Selling Frenzy Piles Pressure on Stock Market. Underwriters Set to Dump Almost $10 Billion in New Shares into Market on Wednesday and Thursday.
Contrary to what journalists want us to believe, Wednesday’s sell-off probably had far more to do with a spike in corporate share selling than it did with the Washington budget deal; the rumored nomination of Stanley Fischer to be Federal Reserve Vice Chairman; or our perennial favorite, ‘disappointing earnings.’ Underwriters are scrambling to unload as much as they can before the new offering calendar’s winter snooze. All else being equal, the more new shares underwriters sell, the less money is left in the checking accounts of stock market intermediaries to buy existing shares.
The ‘white shoes’ already pumped out $4.6 billion from Friday through Tuesday, and Dealogic reports that a whopping $6.5 billion is scheduled for Wednesday—led by big IPOs for Hilton Hotels ($2.5 billion) and Aramark ($900 million) and secondaries for Pinnacle Foods ($550 million) and SeaWorld Entertainment ($550 million)—and $2.3 billion is scheduled for Thursday—led by a follow-on for Darling International ($900 million) and an IPO for CheniereEnergy Partners LP Holdings ($700 million). Add some more overnight deals, and new offerings should easily hit our upfront estimate of $15 billion this week, which would be the highest level this year.