Blackmores, Atlas Arteria go for equitable allocations: this week in capital markets

There was just over $706m raised via placement this week. This was across 29 raises, and with only one raise above $100m. Small cap raises have continued to increase in volume and this has also dragged the average discount out to 23% (from 16% last week, 12% two weeks ago).

Not much to report from the ASX 200 this week

It was only Blackmores and Atlas Arteria who raised from the top of the index.

Blackmores raised for the first time ever and it was a very smooth process. On Wednesday they announced a fully underwritten $92m placement and $25m SPP. There wasn't much risk for their broker, Goldman Sachs, who told the market shortly after open that pre-launch demand from wall-crossed investors exceeded the placement size.

Allocations in placements have become a hot topic in equity markets and have been more stringently addressed in recent weeks. We noticed that Blackmores made a welcome inclusion in their raise materials, promising that: "Eligible shareholders who bid for up to their ‘pro-rata’ share of new shares under the Placement will be allocated their full bid". This is a big win for existing holders, but we wonder how equitable this is in practice as not every Blackmores shareholder will have a Goldman Sachs account? Unless you are and institutional client who is also involved in other Goldman business, you will likely struggle to get access.

Atlas Arteria made a similar claim in their $420m placement - "It is intended that eligible institutional Security holders who bid for up to their 'pro-rata' share of New Securities under the Placement will be allocated their full bid" - but again, one must be an 'institution' and have a relationship with UBS/Macquarie to benefit.

In both cases, it's great to see that companies are acknowledging more transparent allocation procedures. There is however still more work to be done so that HNW/small fund investors who want more than the $30k SPP allowance (which is usually subject to heavy scaling anyway) are accommodated.

Gold continues to shine

The ongoing economic and political uncertainty has naturally benefited gold and precious metal miners. Investors moved towards risk-off assets and supported 10 gold and precious metal capital raises this week. That is 10 raises from a total of 29 across the market.

Gold and iron assets will remain an attractive element in investor portfolios and a regular in capital markets. With oil demand returning and the crude price rebounding, we expect capital begin to flow into the energy sector and recapitalise some weaker balance sheets.

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