New Stocks - a Hopeful Sign
CONSUMERS in the United States may not have gone to market in recent weeks in the large numbers sought by retailers, but guess who is going to market? Corporate America, which has been issuing one of the largest amounts of new stock (equities) since the mid-1980s.Corporations normally issue stock to pay for capital development plans or to retire debt. Brand-new companies issue what Wall Street calls "initial public offerings equity in these businesses. Final figures for 1991 have yet to be tallied. Investment firms indicate, however, that record numbers of existing companies, as well as new start-ups, are issuing stock. The Securities Industry Association reckons that $35 million worth more stock will have been offered for sale than retired or taken out of the market in 1991. That stands in sharp contrast to most of the 1980s, when billions of dollars of equities were taken out of the market through buyouts or mergers. Throughout the '80s scores of prominent public corporations virtually disappeared to investors through buyouts, mergers, or other exotic multibillion-dollar deals. The issue of who owns corporate America is important not just to stockholders or business-school academics. In the 1980s, many companies fell under the sway of speculators and takeover artists. In some cases, tighter management resulted, actually benefiting the company. Yet, the decisions made by those small groups also directly affected thousands of workers - through plant closings, for example. Ensuring the broadest possible ownership of stock in US companies is good for the investment community as well as for public corporations. Broad stock ownership promotes accountability. And in retiring debt through new stock issuings, management is better able to plan for the future. Accordingly, the recent expansion in stock offerings could be a step in the right direction for US corporations.