Many companies have held secondary offerings since election day, for example Kratos Defense & Security Solutions, Inc. (KTOS), which raised more than $80 million before fees during one of these sales, Bloomberg reported. The company, a defense contractor which provides surveillance systems to the government, could benefit significantly should President Donald Trump push through a major increase in government defense spending.
Surge in Secondary Offerings
More than 400 secondary offerings have taken place since election day, 79% higher than the year before, as smaller firms bet that they will benefit from Trump's plans for tax reform and deregulation, according to Bloomberg. Companies worth less than $5 billion have made up the bulk of secondary offerings since then, accounting for $27.9 billion of $47 billion raised through these sales. (For more, see also: How to Trade Effectively Secondary Offerings.)
Small-cap stocks have outperformed the Standard & Poor's 500 Index (S&P 500) since the election, with shares of Kratos surging 36% since that day, Google Finance reveals.
Sharp Stock Gains
Kratos is not the only company whose stock has outperformed the S&P 500, as shares of SiteOne Landscape Supply Inc. (SITE), a national distributor of landscape supplies, have risen roughly 60% since the election, according to additional Google Finance data. SiteOne stock pushed higher as global investors grew more optimistic about home building, Bloomberg reported.
Financial stocks have also done well since Trump's victory, and shares of Franklin Financial Network Inc. (FSB) have climbed more than 30% since the election, according to Google Finance. (For more, see also: Top 4 Financial Stocks for 2017.)
"It's the smaller companies that are more likely to do M&A and related financings," James Palmer, head of equity capital markets for the Americas at UBS Group AG (UBS), told Bloomberg. He emphasized that many companies feel positively about the future because Trump and the new Congress might succeed in paring down regulations and reforming the tax code. As stock prices have surged following the election, corporate boards have been acting on matters they had been putting off.
"I think of small-cap stocks as being the highest confidence indicators because they are high-risk, more volatile, and they typically have higher growth in better conditions," he told Bloomberg.