Macquarie raising may signal peak

Macquarie CEO Shemara Wikramanayake. Picture: Britta Campion

Macquarie Group’s biggest ever capital raising could be a signal that this is as good it as it gets in the current market cycle.

The world’s biggest infrastructure manager plans to invest around $1.6bn this quarter, with $1bn earmarked for Macquarie Capital to spend on renewables, technology and infrastructure assets.

Meanwhile, separately to the raising, about $600 million has been put aside to be used for increased capital requirements for the commodities and global markets division.

But cynics might say the “millionaire factory” has tended to raise equity near peaks, unless of course its hand is forced, as it was in 2009 in the face of the GFC.

On 5 April that year, it raised $540m by issuing a massive 20 million shares at $20.00, two months after hitting a record low of $14.75.

All Australian banks were scrambling to raise capital to shore up their balance sheets at the time. That helped mark the bottom in their shares because it assured their survival.

But two years earlier, on 22 May 2007, Macquarie raised $750m at $87.00. That was just four days after its share price hit what was, at the time, a record high of $97.00.

In 2015 it raised twice — 6.75m shares at $73.50 on 12 March and 5m shares at $80.00 on 15 October.

So by the time the market peaked at $86.72 on October that year, Macquarie had raised a total of $895m at an average price of $76.23.

By February 2016, Macquarie shares had fallen 23 per cent from the average price at which the new equity was raised.

Of course the 2016 sell-off would have been much worse China hadn’t stepped in with massive fiscal stimulus and the Fed didn’t put rate hikes on hold.

And even though Macquarie’s 2009 raising was forced upon it somewhat, on the day, its share price closed a massive 24pc above the issue price.

Now Macquarie is doing its biggest-ever capital raise by issuing about 8.5m shares around $118-$123.50 a share.

After rising 33pc since Christmas, Macquarie shares hit a record high of $136.84 on 2 May 2019 and have since retreated to $123.50.

So while it’s a cynical view, Macquarie’s capital raising form in the decade since the GFC suggests that talk of a peak is not without foundation.

It’s also worth noting that some of Australia’s other smartest investors have also been raising capital.

Earlier this month, Hamish Douglass’ Magellan Financial Group raised $275m at $55 a share.

That followed a 2.7 fold rise in Magellan’s share price to a record high of $62.60 this year.