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Capital Raises Weekly Wrap - 7 February 2022

Fresh Blog

Last updated 3 months ago

Capital Raises Weekly Wrap - 7 February 2022

Capital Raising Wrap

7 February 2022 - Investors and Companies Remain Subdued

As we wave the first month of 2022 goodbye, capital raising activity remains relatively low as investors and companies alike are affected by ongoing macroeconomic uncertainty.

The onset of significant geopolitical conflicts between the Ukraine & Russia, and China & Taiwan, present another source of global tension in already trying times for the markets.

Capital raising activity largely moved sideways with only 10 companies raising via placements across the market, and presents an interesting look into what the year holds in store for us as ongoing macroeconomic factors present challenges to companies and investors alike in equity capital raises.

Market Summary

Global markets have largely remained unchanged from last week, with concerns surrounding inflation data, interest rate hikes and the ongoing COVID-19 pandemic contributing to higher levels of market uncertainty.

Despite this, many global markets saw decent upward moves from lows at the end of January, as investors received more information about interest rates and inflation, whose uncertainty had previously been aggressively priced into stock valuations and resulted in the substantial drops in value during January 2022.

It remains to be seen whether asset prices will take another downwards spiral at the advent of the actual interest rates, or if they've been priced in appropriately and markets will smooth out.

Earnings season on Wall Street also provided a colourful week for investors, as companies like Alphabet, Meta and Amazon posted earnings reports that saw stock prices whiplash into extreme movements throughout the week.

Immediate Performance - Post Earnings

  • Amazon: 13.54%

  • Meta: -25%

  • Snap Inc: 58%

  • Alphabet: 7.5%

  • Apple: 9.4%

Placement Breakdown

Capital raising activity remained subdued into the first week of February, with 10 placements raising a total of $39m. This was spread between 5 different sectors, and materials led the pack in terms of frequency with 4 individual placements. Industrials raised the most in terms of sector, with $19m raised over 2 placements.

The average discount was 9.65% which is relatively low when compared to prior months and combined with the level of capital raising activity currently, presents an interesting question on how companies will stoke investor interest in times of waning investor demand.

MaxiPARTS Limited(ASX:MXI) completed a $15.4m institutional placement following an acquisition of Truckzone Group for $18m. Funds are to be used towards funding this acquisition as well as the associated transaction and integration costs, while also providing capital flexibility and funding for further organic growth initiatives.

Superior Resources Limited (ASX:SPQ) completed a $4.5m institutional placement with funds to be used towards the execution of Bottletree's large multi-stage drilling program and to support Steam Engine's large resource expansion drill program and exploration drilling at new gold zones.

90 Days Post Placement Performance

As we look back on the placement performance of raises in mid September 2021, there were two standout performers who led the cohort.

A-Cap Energy Ltd (ASX:ACB) saw a peak of 197% at 36 days post placement, before settling down to an impressive 157% at 90 days post placement.

Eastern Resource Ltd (ASX:EFE) saw an even higher peak of 286% at 39 days post placement, before pulling back to a respectable 143% at 90 days post placement.

At 90 days, A-Cap Energy Ltd (ASX:ACB) and Eastern Resources Ltd (ASX:EFE) remained head and shoulders above the cohort, and several other performers saw substantial negative returns.

When we pulled returns closer to present with the closing price of last Friday (4/02/22) as reference, there was an interesting change in the performances of one company in particular.

While the return leaders stayed largely unchanged and positive, Conico Ltd (ASX:CNJ) saw a brutal drop to -73% from the offer price, substantially more than -40% at 90 days post placement. Recent price movement appears to be reactionary off a drilling and geophysical report that was released on 1 February.

Check out our Past Capital Raises page for more information on past transactions. If you want more information on Fresh Equities and how we work, feel free to contact our team at clients@freshequities

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