Geoff Wilson’s WAM Leaders cans $732m raising amid ‘heightened market volatility’

The veteran investor’s decision to cancel a placement plan due to market volatility signals growing local anxiety over the banking crisis gripping the US and Europe.

Geoff Wilson’s WAM Leaders has abandoned a $732m share purchase plan and placement ‘in light of heightened market volatility’. Picture: John Feder

Market volatility sweeping the globe has claimed a fresh local public offering, as Geoff Wilson’s listed investment company WAM Leaders cancelled a $732m share purchase plan and placement to investors.

Mr Wilson told investors on Wednesday the cancellation was decided “in light of heightened market volatility”.

It signals growing investor anxiety over the recent banking crisis currently enveloping US and EU markets.

The $1.48 a share discounted offer opened on March 7 and would have allowed an additional 494.3 million shares to be issued under the SPP and placement.

But market conditions changed markedly days after Mr Wilson’s “equitable opportunity” offering to shareholders to increase exposure to WAM Leaders.

Since March 10, bond and equity markets have been unsettled after US banks Silicon Valley Bank and Signature Bank collapsed, forcing US government agencies to intervene to reassure depositors.

The shotgun takeover of global bank Credit Suisse by Swiss rival UBS has also left bank bond holders fuming.

Credit Suisse’s takeover has triggered fears of contagion and questions around the potential for a repeat of the events of 2008-2009 when the failure of a number of mortgage lenders in the US led to the Global Financial Crisis.

Meanwhile another US bank, First Republic, is now in the midst of a massive salvage exercise led by US banking giants.

Global equity markets, including the Australian Securities Exchange, have spent the month so far seesawing in response to ongoing developments – even as investors wait on the US Federal Reserve’s balancing act to quell further concern over rate hikes and tries to curb still-high inflation.

WAM Leaders’ target investment market – large-cap companies – have borne a significant brunt of the volatility as cautious investors seeking safe havens have reduced exposure to some of their more liquid shareholdings.

In its statement to investors on Wednesday, WAM Leaders was brief, blaming the cancellation of the SPP and placement on “heightened market volatility”.

It was in the best interests of shareholders to cancel the SPP and return all amounts to shareholders who participated in the capital raising, WAM Leaders said, with refund transfers starting on March 28.

WAM Leaders, which provides exposure to Medibank, BHP, Aristocrat, Star Entertainment, CSL and others, did not indicate if the decision was influenced by a lack of interest in the offering or detail the size of refunds.

However, the decision comes after WAM Leaders portfolio manager Matthew Haupt on Monday told The Australian investor nerves might soon focus on the next possible bank victim to kickstart a whole new round of anxiety.

“What we are talking about with this process is always a call for confidence. I guess it is a short-term boost to confidence but generally they are very short-term these relief rallies you get when you have a banking sector under pressure because generally what happens is the market searches for the next weakest link now,” he said.

“What we could see over the next week or two, is another bank under funding stress, so this is short-term relief but ultimately we need some sort of system-wide policy put in place like the FDIC in the US saying they are going to secure all deposits for a two-year time frame.

“You basically have got to stop the run on deposits and funding issues with these banks.”

Mr Haupt said the market would be “sniffing for some more weakest links”.

“To get full-blown confidence back we need to see the US guarantee some of the deposits in these regional banks.”

Shares in WAM Leaders, which has a market capitalisation of $1.7bn, closed up 2.4 per cent at $1.52 on Wednesday.

In the 12 months to February 28, WAM Leaders’ investment portfolio increased 11 per cent, outperforming the ASX 200 index by 3.9 per cent.