Remember Seinfeld’s episode on shrinkage? Nobody’s laughing now.

US Financial News reports: European equity markets have shrunk for the first time on the back of a boom in mergers and acquisitions, private equity buyouts and share buybacks — despite record issuance.

It is the first time European, UK and US markets have suffered “de-equitisation” - when more equity is retired than issued — in the same year, according to research by Citigroup. The US market contracted in 1988 after the Wall Street reversal of the previous year and the UK market has been shrinking for three years. A record amount of cheap debt is driving the M&A, buyout and buyback binge which has removed shares from stock markets, especially in the UK, faster than companies can issue them.

Some GBP55bn has been returned to UK shareholders through completed cash takeovers worth GBP60bn, with GBP53bn reclaimed via record buybacks and special dividends.


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