Some investors are nervous. After all, three of the largest equity offerings ever are landing within months of each other. That will soak up the cash that holds everything else up, they argue.
Veteran strategist Ed Yardeni says the worry is misplaced. He laid out the math in a client note on Monday.
“The combined market value of these three companies is widely expected to total $4 trillion to $5 trillion once they go public,” Yardeni wrote. “The capital being raised is around $200 billion.”
Valuation Is Not The Same As Fundraising
At first glance, a $5 trillion wave of listings sounds like a vacuum capable of pulling money out of every corner of the market. But a company’s market value counts every share that exists. The cash it raises is only the slice it actually sells to the public.
That slice is what hits the market: roughly $200 billion spread across three deals over several months. And the market it is landing in is enormous. The Wilshire 5000, a benchmark to gauge the overall health of the entire U.S. stock market, carries a market capitalization of roughly $75.6 trillion. The S&P 500, alone, is worth nearly $60 trillion.
Set against that, U.S. equity markets already financed $232 billion in new stock issuance over the twelve months through April, and more than $450 billion was raised during the 2021 ...
