(10 March 2021 – Australia) Australian enterprises are raising a record level of funds in equity capital markets (ECM) with 149 equity offerings on the back of a resurgent stock market and strong investor demand as the economic rebound from the COVID recession gathers pace.
The sharp increase in equity offering demand reflects a robust appetite for raising fresh capital to underpin growth as the Australian stock market (ASX) trades close to record highs.
The equity offerings represent a 55 percent increase in equity capital market (ECM) deal flow year-on-year according to Refinitiv, raising almost A$3 billion which constitutes 75 percent of the total funds raised in Q1 2020.
Three of the five largest deals were from energy companies and Refinitiv’s data does not include block trades, where existing shareholders sell parcels of stock to other investors but no new funds are raised.
CFOs are seeking to raise capital to fund growth through merger and acquisition (M&A) transactions as opposed to reinforcing their balance sheet which was identified as the primary driver for ECM activity in the immediate outset of the crisis in Q2 2020. The Australian economy has outpaced economists' forecasts with GDP data showing 3.1 percent growth in Q4 2020 compared to estimates of 2.5 percent.
“Sometimes it takes a little while to get the year started but this year it has started very quickly. The market has been very strong and that has created the opportunity to access it” stated Citi Australia Head of Capital Markets Origination, John McLean.
“We have a one-in-ten-year spike in M&A activity, if you look at the companies speculated to be under offer. The IPO pipeline is also very active. Balance sheets are in incredible shape and as we saw from reporting season earnings are stronger than expected. Growing companies will always need capital, but the market isn’t always available to them. It is available to them now” Mr McLean added.