The recovery rally continues. There was quite a bit more for followers of capital markets to sink their teeth into this week. Just over $1.5b was raised across 30 placements.
Three raises dominated the tally and headlines this week:
- Vicinity Centres (VCX) raised $1.2b;
- Iress (IRE) raised $150m; and
- Arena REIT (ARF) raised $60m
Investors in all three were greeted by positive price movements following the announcement of the raise. Iress is now trading up 10% from the placement price, Vicinity is up 15% and the Arena REIT is up 6.5% - not bad at all to be 10-15% up on day one!
We are noticing that this sort of market reaction to a capital raise is more common now vs. 6 months ago. The majority of affected companies have been treated as cum-raise by investors since the pandemic started so when the pressure is released (through a raise), momentum returns. Followers of these capital raises should remember that price pressure is as much about the buy-side as it is the sell-side. When investors smell a raise coming it won't always be selling that keeps price down, but the buyers who are now sitting on the sidelines waiting for discounted shares.
On Tuesday, Arena set out to raise $50m but quickly upsized to $60m. The enlarged placement showed signs of stronger than expected support from existing institutions. All existing institutional holders were allocated their bid "in full" and there was room for new investors. Other shareholders were given the opportunity to acquire the discounted shares through a $10m SPP, conducted at the placement price.
The Vicinity Centres raise is further evidence that commercial property holders are hurting. In response to COVID-19, Vicinity has now withdrawn guidance, removed their distribution (think dividend) for the current half and discussed a write-down of $1.8b - $2.1b from the value of their portfolio. Green shoots are starting to emerge: foot traffic is increasing, rent receipts should improve commensurately and investors were more than to happy to support the $1.2b raise!
We noticed in the Vicinity raise documentation that the $200m follow-on SPP was accompanied by the following note - "The relative size of the Placement and the target size of the SPP has been structured to reflect the split between the aggregate securityholdings of institutional and non-institutional securityholders." This must be a welcome inclusion for non-institutional holders who are to be given a fair crack at the opportunity to average down.
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