COVID-19 says you raised $13bn, GFC? Hold my beer
Link copied to
ASX companies raised $13.3bn in April, beating the volume of cash raised at the height of the global financial crisis.
Australian companies rushed to raise money in March, following a just-in-case mantra of raise early, raise a lot in order to avoid investor fatigue.
However, ASX investors have proven to be eager to jump into almost every fundraising offer made to date, as memories return of the market boom 12-18 months after the global financial crisis (GFC).
In December 2008 companies raised $13.1bn from the market, according to ASX data.
Unlike during the depths of the GFC, however, April saw seven new listings. These collectively raised $97m.
The ASX also used lessons learned during the GFC to this time rapidly loosen rules around raising capital to allow companies to raise money quickly.
During the GFC, retail investor risk appetite was low, the ASX said in a review into fundraising during that period, so quick placements to select investors followed by more general rounds for all other shareholders was necessary.
“While some stakeholder groups have called for narrowing the range of options available to boards, often suggesting ASX or ASIC prescribe a single capital raising mechanism (usually a renounceable rights issue) to ensure the fairness of the offer, the experience of the GFC shows that a more flexible approach is better adapted to volatile or extreme economic circumstances, or to specific circumstances facing an individual company,” the ASX said in the review.
In March the market operator put those lessons into play by changing its rules to let companies raise money quickly, albeit at the expense of fairness for all shareholders.
It supersized the placement capacity limit from 15 per cent to 25 per cent a year, removed a 1:1 limit on larger non-renounceable entitlement offers, and allowed companies to have back-to-back trading halts to prepare for capital raisings without requiring a share suspension which carries repercussions for raising capital later.