Equity raisings run out of puff as mood lifts

Some ASX listed companies now believe that their existing funds will see them through the coronavirus crisis without the need for a capital raising. Picture: Getty Images

In a month when the state of the market seems to change on a weekly basis, the thinking is that some companies hoping to raise sizeable amounts of equity could be having second thoughts as sentiment improves and stock prices rally.

Market sources on Wednesday were reporting that some groups that had been seriously considering tapping the market for cash were starting to see light at the end of the tunnel with COVID-19 disruptions.

They and now believe they have enough funds to hold on for about three months when they hope trading restrictions will be lifted.

Even though the market closed lower on Wednesday, it has in recent days been clawing back some of the losses from when the COVID-19 panic set in last month.

It has swiftly moved in the past three weeks from a bear market to a bull market, rebounding more than 20 per cent from the March 23 low, partly fuelled by government and central bank stimulus.

While it is unclear when the government will ease restrictions, many believe that it is

now likely to be sooner rather than later, with Australia successfully flattening the COVID-19 curve.

QBE Insurance sought more than $1.2bn from investors on Tuesday in the biggest COVID-19-related equity raising so far, with only existing investors receiving stock because the take-up for the raising was so strong.

But now the thinking is that other major deals may not eventuate.

On Wednesday, only a handful of small equity raisings were announced, including Euroz Securities and Canaccord Genuity assisting Salt Lake Potash on $20m-plus equity raising efforts, zinc miner New Century Resources raising more than $20m through Canaccord Genuity at 10c per share, and Electro Optic Systems raising $134m by way of a placement through investment bank Citi.