This week in capital markets

$5.7 billion of capital was raised this week across 33 placements, although it is worth noting that $3 billion of that tally is attributable to a single monster placement from NAB. At the other end of the market, small caps continued to grow more confident and rattle the tin during what is now (strangely) a strong market.

Here’s what happened

NAB was the first major placement to be completed since ASX/ASIC started cracking down on allocation policies in COVID raises. Institutional shareholders were essentially given their ‘pro-rata’ entitlement and the rest was given to other existing holders. An SPP was announced to follow so mum and dad investors got a look in. The only losers were HNW holders who wanted more than $30k but didn’t have the clout for an institutional account.

Charter Hall (CHC) was the first of the REITs to raise during COVID. In recent weeks consumer spending has slumped and plenty of shops have remained closed, this will continue to place pressure on commercial property landlords. We anticipate that there will there are at least a few REIT raises still to come.

Small caps gaining confidence

The New Century (NCZ) raise was a good example of how investors of all types have been using COVID-19 capital raises to re-deploy capital at low-cost and relatively low-risk. Terms were first released for a $20m placement at $0.10/share with a follow-on $10m SPP. A few days passed and the deal was re-cut to allow Independence Group (IGO) to take a 19.9% position in the company (via a $23.8m placement), other investors were invited into a $27.3m entitlement offer. This new deal was done at a higher price of $0.15/share. Not bad at all given the times we are in.

Two weeks ago you would be very surprised to see a $3m market cap company make use of its full placement capacity. The “oversubscribed” Moho (MOH) raise this week is a good barometer for how the small cap sector is starting to fire up and gain confidence. Elsewhere, Janison (JAN) went out to raise $3m with $2m already committed from a strategic investor and came back with $7m!

Everyone wanted a piece of De Grey (DEG). They have been on a tear since January, up around 610%, and are part of one of the hottest COVID sectors — Gold! There was no follow-on shareholder offer announced but the JLMs were telling bidders that existing holders were strongly preferenced.

Commitments before a raise are critical

Finally, a trend that we have observed in recent placements. In a normal market, few companies will pull the trigger on a trading halt without having a decent amount of their raise pre-committed via a cornerstone or soft book-build. In volatile times like these getting pre-raise support is even more important.  

We have seen recently that a number of companies (particularly small caps) have touted very strong commitment from existing shareholders before going out to the wider market. When times are tough it makes sense that those already invested in the company will have the required confidence to kick off a raise. 

A good example from this week was Immutep (IMM) who launched a $12m raise with soft-commitments from existing holders and new investors that exceeded the size of the book — a very conservative way to raise without underwriting…

Deals this week

• MGC Pharmaceuticals ltd (MXC) raised $3,500,000