Flurry of ASX Recapitalisations

For many businesses, now might be the right time to tap the market for additional working capital.

The current economic conditions are causing some ASX listed companies to shore up their balance sheets in light of the continued impact of COVID-19 on their businesses.

We are seeing a number of equity raises being conducted in the market to recapitalise and provide additional support as businesses navigate the current environment. Brokers are also gearing up with the expectation of an onslaught of companies looking to recapitalise. We understand through our network that broking firms are excited about the opportunity.

The ASX is being supportive of these raises, with a temporary extra placement capacity announced on 31 March. These rules increase the size of share placements a company can undertake without shareholder approval from from 15% to 25% of the company’s share base. The raised limits are available so long as the company also makes an entitlement offer at the same or lower price. The temporary changes are in effect until 31 July 2020.

Understanding the issues and process around this will be familiar to many listed companies. However there are new issues to consider such as:

  • current discounts provided to the market

  • number of brokers you approach to maintain a competitive process

  • Timing of the recapitalisation. We believe over the coming 6 months as there will be a drain on investors as more-and-more large recapitalisations come to market.

Some recently announced raises (to name a few) include:

  • Auckland Airport announced on 6 April a NZ$1.2 billion equity raise

  • Cochlear announced on 25 March a $850 million equity raising

  • Flight Centre announced on 6 April a $700 million equity raising via a placement and an entitlement offer

  • IDP Education announced on 1 April a $175 million institutional placement

  • Kathmandu announced on 1 April a $207 equity raising via a placement to institutional investors and an entitlement offer

  • NextDC announced on 2 April a $672 million raise

  • Ooohmedia announced on 26 March a $167 million equity raising via a placement and entitlement offer

  • Webjet announced on 1 April a $275 million entitlement offer

We are seeing in these rounds some heavily discounted pricing compared to previous trading levels and reasons for equity raises including:

  • increasing liquidity to support working capital

  • decreasing debt levels

  • growth capital to meet capacity requirements

We are available to assist you build your financial model to support your decisions and plan for the coming challenges. Please click here if you would like someone to contact you regarding assistance.