While American firms normally repurchase way more stock than they sell, this year has been different, as offerings by everyone from Snowflake Inc. to Warner Music Group Corp. flooded the market with shares. Companies hurt most during the pandemic, from airlines to cruise lines, are rushing to raise cash and shore up balance sheets.
For now, of course, there’s no sign the slowdown in buybacks is impeding price gains, when everyone from hedge funds to retail investors are chasing rallies that added a record $5 trillion to equity values in November. It’s also possible that positive vaccine news will usher in a reawakening for buybacks.
"Obviously when the market is at an all-time high, you want to issue shares now, because the shares are worth a lot more than they would be if the market was tanking, ” Winston Chua, an analyst with EPFR, said by phone."Looking at the market broadly, companies are not being supportive of share prices.”
That’s a scenario that Goldman Sachs Group Inc.’s strategists led by David Kostin see coming. In 2021, net share repurchases will double to $300 billion and equity issuance will fall from this year’s record high, his team forecast.
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