De Grey shines as a darling gold stock and Quickfee joins the BNPL game: this week in capital markets
We're covering two week's worth of raises in this edition.
The week of the 7th September saw $477m of fresh equity issued across 21 transactions. Nearmap, PointsBet and Mali Lithium were all hotly contested amongst capital markets regulars. The pitches for these larger raises focus almost universally on growth, a theme which we have foreshadowed previously. We suspect that most of the market's appetite for higher risk "balance sheet" raises has been used, and that companies will now need to show momentum and new opportunity to claw in funding.
This week there was significantly less volume, like the previous week 21 transactions were completed but this time it tallied up to a mere $233m.
Billion dollar gold explorer De Grey had plenty to announce this week
De Grey is one of the most loved Gold explorers on the local bourse. The company gets plenty of attention from brokers and their research analysts, has a strong following in the FinTwit universe and continues to deliver a frothy share price. Capital markets followers will already be familiar with De Grey and their Hemi discovery, it is after all the 4th time the company has hit the market for more funds since July 2019. Although we can't imagine that investors who have tipped in along the way will be too concerned with constant raising. The company's share price has moved more than enough in the right direction to alleviate any concerns. If you were one of the lucky few that put $1,000 in De Grey's July 2019 raise and held, you'd now have $31,000. The minimum bid in a placement is usually $10,000 and often higher, so you can see why there's still plenty of interest 4 raises later...
This week's raise brought in $100m via a quick private placement. There wasn't any opportunity for non-institutional shareholders to participate but they will surely be happy with the stable share price and additional news flow items that this raise has bought for them. Some institutional & insider shareholders were involved. The company's largest shareholder DGO Gold participated to the tune of $12m and was also in the market last week raising for their own balance sheet so that they could fund this investment. Also included was a $3.1m partial sell-down by some of the company's key management. It's usually difficult to manage the market perception of sell-downs and not appear opportunistic. But in this case, plenty of shareholder value has already been delivered (see above) and we're in a hot market, so it seems reasonable.
Quickfee jumps into BNPL, but with a difference...
Quickfee provides financing to the clients of law firms and accountants in order to guarantee fast payments and smooth cashflows. It earns revenue by charging interest to the clients of these firms and standing in the middle of the process.
This week the company announced a $17.5m funding package which included a $15m placement and $2.5m follow-on SPP. The funding is earmarked for completing a new partnership with Splitit and enable the roll-out of an "Advice Now, Pay Later" model. Essentially, Quickfee will now be able to work with smaller professional firms and offer them an interest free instalment option. The new product will take advantage of Splitit's existing technology and processes as well as the funding from the capital raise which gives Quickfee a >$100m gross financing capacity.
As markets slowly emerge from COVID, we expect that companies like Quickfee who are aggressively pursuing growth will continue to be rewarded by capital markets.
Not already a Livewire member?
Sign up today to get free access to investment ideas and strategies from Australia's leading investors.
MORE ON Equities
21 stocks mentioned