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State Firms Raising Less Through New Stocks, Bonds

Financing: Report says they've generated $4.3 billion in capital so far this quarter, versus $10.2 billion for the third quarter of '97.

September 23, 1998|WALTER HAMILTON | TIMES STAFF WRITER

With a slumping stock market scaring away investors, California companies are raising far less money through new stock and bond offerings this quarter than in recent periods, a study shows.

The research by Bowne of Los Angeles, a financial printing firm based in Dominguez Hills, shows that California companies raised only $4.3 billion from July 1 through Sept. 14. By contrast, they issued stocks and bonds worth $10.2 billion in the entire third quarter of last year and $11.2 billion in the second quarter of this year.

Southern California-based companies have suffered a smaller financing drop-off than those in Northern California. But with the outlook for initial public offerings and other types of financing gloomy, speculation is growing that the raising of capital won't bounce back until at least January.

"This is a typical quiet period after a [stock market] correction," said John Jackson, a Bowne senior vice president. "The word on the street is uncertainty. Deals are on hold, and the talk is that the rebound will be in January."

IPO issuance has dried up in the last four weeks as the stock market--particularly smaller stocks--have been weak. Even with a 1.5% rally Tuesday, the Russell 2,000 small-stock index is down almost 16% this year.

The IPO market is expected to get a brief boost today with the scheduled sale of EBay Inc., a San Jose-based company that runs a popular Internet auction site.

To compile the report, Bowne analyzed Securities and Exchange Commission data. In addition to IPOs, firms raise money by selling bonds, preferred stock or additional common stock.

For the Southern California region, excluding San Diego, capital raising has slumped to $2.4 billion so far this quarter from $4.5 billion in the year-earlier period. In Northern California, companies generated only $1.9 billion, down from $5.2 billion.

Whereas most third-quarter deals in Northern California have involved selling stock, only $250 million of Southern California's $2.4 billion was raised in equity deals.

Los Angeles-based companies have raised $2.2 billion this quarter in 33 financings, compared with $3.4 billion in the third quarter of last year in 56 deals, according to the report.

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