• ASX cap raise volumes on par with 2021 but total money raised barely half on last year’s $20 billion 
  • Micro caps and small caps led the charge with majority in growth stage 
  • The Mining Sector saw the most capital raises, followed by industrials and energy

It’s been a volatile year for global equity markets amid rising inflation, interest rates, geopolitical tension and the everlasting fallout from COVID-19.

The ASX was no exception.

The Reserve Bank of Australia (RBA) again this month raised the official cash rate by 25bps (to 3.1%) – the bank’s eighth straight rate rise since it started lifting the OCR from a record low of 0.1% in early May to arrive now at its highest level in a decade as the bank’s vanguard in the fight to contain inflation.

By the start of this week the S&P/ASX 200 was down ~5.54% year to date, while the S&P/ASX Emerging Companies (XEC) index, the benchmark for Australia’s small and micro cap companies had fallen more than 23%.

While it was clear interest rates would be heading up to combat inflationary pressures in 2022, markets were quick to react to any economic data or commentary which hinted at the rate of rises by central banks.

So, amid the mercurial trend on markets how did ASX capital raising go this year?

Breaking down the figures

With a little help from Fresh Equities and Fresh Amplify here’s an overview of ASX capital raising over the past 12 months.  The data is pulled from Fresh Equities between December 1, 2021 to November 30, 2022.  

Fresh Amplify CEO Ben Williamson told Stockhead placements are “open and closed” deals within a relatively short period of time, typically lasting 1-2 days.

“Therefore, macro market fluctuations have a lower impact on their performance,” he said.

“Share purchase plans (SPPs) and entitlement offers (EO) typically follow placements for a smaller amount.”

Whilst extremely valuable to both shareholders and companies, in times of uncertainty the macroeconomic environment can have a greater impact on SPPs and EOs due to the length of the deals, which can be up to four weeks.

“Therefore we see that placements are a good barometer of investors’ willingness to continue to support the market over a 12 month period.”

We’ve also excluded IPO’s from the data. Market caps are broken down as:

  • Large caps >$10 billion
  • Mid caps $2 billion to $10 billion
  • Small caps $300 million to $2 billion
  • Micro caps $50 million to $300 million
  • Nano caps <$50 million

Placements similar to 2021, but money raised lower

Fresh Amplify  data suggests despite the downturn, compared to 2021, the average discount and quantity of placements were relatively similar – with 13% discounted in both years.

COO Alex Stella said there were a total 599 placements in 2022 versus 564 placements in 2021.

“However, the total sum of money raised was drastically lower with $11.5 billion in 2022 versus $20 billion in 2021, which shows that companies adjusted to the market conditions of 2022 by being more conservative in their capital raising,” he added.

Smaller end of town, bigger share of raising

In terms of capital raising throughout 2022,  micro caps and small caps led the charge. 

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“The ASX board is heavily skewed towards smaller companies, around 1,500 of the 2,500 companies on the exchange have a market cap less than $100m,” Stella said.

“The majority of these companies are in their growth stage and constantly require new capital to fund their operations.

“In a tough market like 2022 companies who can avoid raising (larger companies) will hold off until prices are more favourable and only those that need to raise (smaller companies) will choose to rattle the tin.”

Mining sector leads capital raises in 2022

The ASX mining sector led the capital raises for the year, followed by industrials and energy sector.

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“There have been a number of significant global events such as the war in Ukraine and ongoing supply-side issues which have kept energy and critical mineral prices buoyant in 2022,” Stella said.

“Australia is home to assets in both sectors and this has led to a funding frenzy on parts of the ASX as our market races to bring new supply online.”

Tough market for capital raising

Williams said 2022 has been a tough market for raising capital both for private and publicly listed companies.

“What is encouraging, though, is that the issuers that were effective at educating their market on the company behind the code were able to raise capital without selling the farm,” he said.

Williams said being able to communicate effectively with investors is vital in any cycle but particularly during a market downturn (see our story on How out of favour Biotech has a PR problem and could learn from Dr Karl).

“We built Fresh Amplify so that issuers could effectively engage their shareholders and build a community of investors so that, when it comes time to raise capital, the company is in a good position,” he said.