Behind the Bull Market of US Stocks: Big Capital is Selling Stocks at the Fastest Pace in Years

As the US stock market finally rebounds, companies and their largest investors are selling stocks at the fastest pace in years.

According to data from research firm Dealogic on June 11th, global corporations and private equity firms have sold more than $24 billion worth of stocks since the end of April, with more than $17 billion worth of stocks sold in May alone, far exceeding last year's monthly average of $6.9 billion. Moreover, the discount rate of this sell-off is smaller than usual, reflecting strong market demand.

Last week, the S&P 500 entered a new bull market, rising 20% since its low point in October last year. Benefiting from investors' optimistic sentiment towards artificial intelligence, companies such as Amazon, Tesla, and Nvidia have boosted their stock prices after announcing better-than-expected financial performance. The S&P 500 has been rising for the past few months, and investors can no longer hold back.

Nearly half of the sell-off comes from large investors such as private equity firms, who have been looking for creative ways to sell company stocks and return funds to pension funds and other funding institutions. The typical strategy of private equity firms is to acquire companies they believe are undervalued, streamline their businesses, and then repackage these companies for listing or sell them at higher prices in a few years. However, the sluggish IPO and M&A markets have made it more difficult to achieve this goal.

According to the Wall Street Journal, Keith Canton, head of Morgan Stanley's US stock capital markets, said, "There is a view that trading volumes may continue to be sluggish in the future, and selling stocks now gives them the opportunity to return funds to partners."

For example, in May this year, private equity firm Clayton Dubilier & Rice sold about $2 billion worth of shares in medical technology company Agilon Health, the largest sale in the US stock market in more than a year. Intel sold more than $1.6 billion worth of shares in its self-driving company Mobileye this month, exceeding its initial plan.

In addition, General Electric sold about $2 billion worth of shares in its spun-off GE Healthcare Technology Company, while American International Group sold more than $1 billion worth of shares in its life and health insurance company Corebridge Financial, which was spun off last year.

Usually, in order to attract buyers, sellers must offer higher discounts for more recent transactions in subsequent sell-offs. Dealogic's data shows that in 2020 and 2021, when demand for stocks was high, the average discount rate dropped to 8.4%; since the beginning of 2022, the average discount rate has jumped to around 12%. In May of this year, this discount rate began to drop again to 8.3%, and further decreased in June.