induced slowdown as their collective market capitalization surged 52% for the year ending June 30, soaring past $1 trillion for the first time.
The 119 companies on the Business Journal’s annual list of publicly traded companies headquartered in Los Angeles County posted a collective market cap of $1.11 trillion on June 30, up from $733 billion for the 121 companies on last year’s list.
Similarly, the 109 companies that appeared on both t
Both increases exceeded the double-digit gains for the broader U.S. equity markets over the same 12-month period. The Dow Jones Industrial Average rose 34% in that stretch, the Nasdaq jumped 44% and the Standard & Poor’s 500 climbed 38%. The broadest market index, the Russell 3000, increased 42%.
What’s more, the overwhelming majority of the companies on the list posted gains in market cap over the 12 months ending June 30. A whopping 105 companies saw increases in their market cap, while only six companies saw their market caps decline — the most lopsided ratio in years.
Several factors are behind the market cap surge by local companies, including a high concentration of companies in strong performing sectors and a sizable contingent of small-cap companies.
“Many of the outperforming companies are concentrated within energy, health care, consumer discretionary and financials, which have been some of the strongest performing groups within the broader equities markets during this time period,” said Sahak Manuelian, managing director and head of equity trading at downtown-based Wedbush Securities Inc. “Having a large quantity of companies within the top performing sectors gives the L.A. market some nice outperformance versus the broader tape.”
Manuelian also noted the presence of several microcap stocks, such as Chatsworth-based Cavitation Technologies Inc. and Santa Clarita-based New Hydrogen Inc., which both had market caps under $20 million. New Hydrogen had the second-biggest percentage gain in market cap on the list, surging 1,700%, while Cavitation Technologies posted a substantial 570% gain in market cap.
On the broader markets, microcaps did very well over the past year, with the Russell 2000 index of small caps registering a gain of 60% for the 12 months ending June 30.
“The microcaps on this list helped skew market cap performance in favor of L.A.,” Manuelian said.
Setting the pace
But it was the largest company by market capitalization that set the tone for the entire list and accounted for a sizable portion of the collective gain in market cap. No. 1 Walt Disney Co. posted a market cap of $319.4 billion, comprising 28% of the total $1.11 trillion market cap of all the companies on the list.
Disney’s market cap was up 60% from about $200 billion a year earlier. That gain of $119 billion accounted for 31% of the total collective gain in market cap of $385 billion, which means Disney alone was responsible for pushing the cumulative market cap of L.A.’s publicly traded companies over the $1 trillion mark.
However, substantial gains at other companies in the top five cut slightly into Disney’s dominance. No. 3 Snap Inc. gained roughly $70 billion in market cap, tripling its value to nearly $104 billion. No. 4 Activision Blizzard Inc. and No. 5 Public Storage Co. posted market cap gains of $15 billion and $19 billion, respectively.
Several companies on the list benefited directly from the Covid-19 pandemic, chiefly Temple City-based genetic testing company Fulgent Genetics Inc., which surged 668% in market cap to $2.67 billion.
Computer gaming stocks, such as Activision Blizzard and Super League Gaming Inc., also did well with many people were trapped at home during partial or near total pandemic lockdowns. Super League Gaming was the sixth-biggest percentage gainer at 667%.
Newcomers provide boost
Unlike last year, when there were no newcomers to the public companies list, this year there were nine, thanks mostly to the boom in special purpose acquisition companies, or SPACs, looking to take companies public.
Five local companies took the SPAC route to public company status in the 12 months ending June 30, including Manhattan Beach electric vehicle-maker Fisker Inc., Vernon-based electric battery-maker Romeo Power Inc. and Long Beach-based skincare company Beauty Health Co.
Three other companies went the initial public offering route, including Santa Monica-
based prescription drug comparison price shopping company GoodRx Holdings Inc. and Westlake Village-based real estate loan company Velocity Financial Inc.
Looking ahead, Wedbush analyst Manuelian sees a diverging future for SPACS and IPOs.
“Looking into the second half of this year, I think the SPAC market may continue to stay choppy and will have challenges as so many came to market in such a short period of time,” he said.
Also, regulators are beginning to pay more attention to SPACs, placing additional requirements on the process and making it a less attractive alternative for some companies seeking a smooth and cheap path to going public.
But Manuelian sees continued strength for the IPO market.
“The IPO market is likely to stay strong as investor appetite for equities has not waned,” he said. “Scarcity of assets, easy monetary policy and equities remaining the best game in town are all factors for this.”
Exiting companies
As for exits from the Business Journal’s public companies list, the trends were similar to last year when eight companies fell off the list. Of the 12 exiting companies this year, seven were acquired, with the acquiring company either outside the county or not publicly traded.
Just last month, for example, Santa Monica-based Boingo Wireless Inc. was acquired by Boca Raton, Fla.-based investment firm Digital Colony Management for $854 million in an all-cash deal, resulting in Boingo being delisted from the Nasdaq exchange.
And in March, Santa Monica-based mortgage REIT Anworth Mortgage Asset Corp. was acquired by New York-based Ready Capital Corp. The combined company then started trading under Ready Capital’s ticker.
Four companies relocated their headquarters outside the county during the 12 months ending June 30. Among them: commercial real estate giant CBRE Group Inc., which moved from downtown to Dallas, and Colony Capital Inc., the real estate asset company founded by Tom Barrack, which relocated its headquarters to Boca Raton, Fla. from downtown.
