Another sharp drop on Monday in the Paris Stock Exchange, which lost 5.75%, a spectacular drop of more than 35% in one month. However, this dropout is not (necessarily) very serious, because companies can very well do without the stock market.
In 1991, when Edith Cresson had just been appointed Prime Minister by François Mitterrand, the stock market had gone down. She then declared in Le Journal du Dimanche : "the fall of the stock market, I have nothing to wax about it". And she was not wrong! Operationally, it doesn't change a thing for a company if its stock market price is at this or that level. It is sad for the shareholders, but for the running of the business it changes nothing.
The real vital market for a company is not that of stocks ... it is that of bonds. What is an obligation? It is a debt instrument, an acknowledgment of debt. When a company goes into debt, it is said to "issue a bond". And that is vital. Companies constantly need to go into debt to manage their cash flow, or invest in new projects.
The real risk - unfortunately proven with the coronavirus crisis - is that this bond market is closing, especially for the most fragile companies. The weakest companies can no longer get into debt ... or have to pay very high interest rates. For example: airlines. We are talking about bankruptcy in the sector. Nobody wants to lend money to an airline? Or at very high rates.
With the very low interest rate policy implemented for years, we have an incredible number of companies, sometimes - barely profitable - but surviving on debt. They are called "zombie" companies. This coronavirus could well decimate all these companies - barely profitable and over-indebted - and which today no longer have access to the credit market.