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Businesses have come to a standstill, and a major decline in the economic growth with a significant slowdown in the economies amidst the current scenario predominantly impacted by the coronavirus. A liquidity crisis is a key concern for businesses to fund their regular expenditure as well as their capital expenditure and companies are resorting to capital raising to boost their liquidity and fortify their balance sheet.
Why Capital Raising?
Every business requires cash for carrying out their operations in a standard yet progressive fashion. Principally, a business generates cash through commercialisation of its products or services, thereby generating revenue and earning profits.
Cash is something for which a business can always extend its capacity to hold, for serving routine as well as unforeseen events. Capital raising is a prominent way for businesses to raise capital to offset the liquidity crunch. Currently, companies are experiencing increased burden to maintain liquidity and sound financial position as they are at a standstill due to the COVID-19 pandemic that has rapidly spread across the globe.
Moreover, the revenue generation capacity of businesses is likely to be impacted in times of economic or financial crisis. Currently, businesses are experiencing an unprecedented impact on their revenue due to the disruption in the supply chain and distribution cycle.
Recently, several ASX-listed companies have completed their capital raising under which material amount of funds have been raised to fund the operations of the businesses, maintain liquidity and strengthen the financial position.
We shall now discuss the capital raising undertaken by some of the ASX-listed companies recently.
Oil Search Limited (ASX:OSH)
The largest Company and investor in Papua New Guinea, Oil Search Limited has successfully completed the placement to institutional investors and the institutional component of its 1 for 8 accelerated pro-rata non-renounceable entitlement offer of new ordinary shares in the Company. Oil Search raised approximately $1,080 million through the offer.
The oversubscribed placement helped the Oil Search raise the amount at an offer price of $2.10 per share that reflects a 23.1% discount to the Company’s last closing price and an 18.0% discount to TERP (Theoretical Ex-Rights Price). Moreover, OSH expects approximately $1,160 million of combined proceeds from the equity raising.
The Company looks forward to not only enduring a prolonged period of low oil prices but also sail strongly through the current period of ambiguity. Oil Search is focussed on sustaining safe and reliable operations from its oil and gas assets in Papua New Guinea through the proceeds of the placement and its cost-effective measures during COVID-19.
The OSH stock was trading at $2.665 on 09 April 2020 (at 11:51 AM AEST), up by 3.696% compared to the previous closing price. The Company has a market capitalisation of $3.92 billion and ~1.52 billion shares outstanding.
Flight Centre Travel Group Limited (ASX:FLT)
One of the world’s largest travel agency groups with operations in 23 countries, Flight Centre Travel Group Limited has also announced the successful completion of its institutional placement and the institutional component of its 1 for 1.74 accelerated pro-rata non-renounceable entitlement offer of new fully paid ordinary shares. FLT raised a total of $562 million at an offer price of $7.20 per new share.
With a take-up rate of approximately 96% under the Institutional Entitlement Offer, FLT witnessed reliable support from the existing shareholders as well as the new investors. Flight Centre believes that the funds raised through the placement shall enable the Company to endure through the current period of disruption in the worldwide travel industry while maintaining to offer outstanding service to its corporate and leisure customers.
Further, a retail entitlement offer that was expected to open on Wednesday, 08 April 2020, is expected to raise around $138 million that shall be used to fortify the balance sheet of the Company and strengthen the liquidity position of the Company to navigate through current times of disruption and uncertainty across the travel sector. The offer is expected to close on Friday, 01 May 2020.
The FLT stock was trading at $10.980 on 09 April 2020 (at 11:51 AM AEST), up by 3.585% compared to the previous closing price. The Company has a market capitalisation of $1.08 billion and ~101.44 million shares outstanding.
SCA Property Group (ASX:SCP)
SCA Property Group, an internally managed real estate investment trust, raised $250 million through the issue of 115,740,741 new fully paid ordinary units under the successful completion of a fully underwritten institutional placement at a price of $2.16 per unit.
The Company shall utilise the proceeds from the placement towards fortifying its balance sheet and offer flexibility to continue to deliver on the Company’s strategy to invest in progressive convenience-based supermarket-anchored centres as and when the opportunities arise.
SCP looks forward to settling new shares on 15 April 2020 and allotting the same on 16 April 2020, after which, the Company expects to undertake a non-underwritten Unit Purchase Plan (UPP).
Under the UPP, SCP shall offer the eligible unitholders in Australia and New Zealand with the opportunity to subscribe up to $30,000 of additional New Units, without brokerage and transaction fees.
The SCP stock was trading at $2.220 on 09 April 2020 (at 11:51 AM AEST), up by 0.452% compared to the previous closing price. The Company has a market capitalisation of $2.08 billion and ~942.11 million shares outstanding.
Paradigm Biopharmaceuticals Limited (ASX:PAR)
Paradigm Biopharmaceuticals Limited has successfully placed $35 million in shares to leading Australian and international institutional and sophisticated investors at a price of $1.30 per share.
PAR looks forward to utilising the proceeds from the placement towards costs of the second Phase 3 osteoarthritis (OA) clinical trial and shall stand enough to fund the completion of the Phase 3 trial fully.
The Company received strong support from the leading institutional investors both domestic as well as international, and the funding shall enable the Company to singularly focus on executing the trial and delivering outcomes for patients in the expanding market.
PRA believes that the receipt of the commitments for the placement has triggered PAR to stay focused on the clear path towards regulatory approval and commercialisation.
Capital raising enables PAR to be focused on the clear path to regulatory approval and commercialisation
PAR expects to complete the placement on or around Wednesday, 15 April 2020.
The PAR stock was trading at $1.605 on 09 April 2020 (at 11:51 AM AEST), down by 1.231% compared to the previous closing price. The Company has a market capitalisation of $321.45 million and ~197.81 million shares outstanding.
