November 19, 2020
In July we looked at the broader picture of equity raisings on the JSE, which appeared to have picked up significantly. It was reported that capital raised on the JSE for the first five months of the year (up to May 2020) amounted to R15 billion. In the second part of the series on always being capital-market ready we conduct a follow up analysis and what this mean for listed entities. The flurry of activity at the time and, uncertainty around the long-term impact of the Covid-19 pandemic, created the expectation that capital raisings would be the order of the day.
The data indicates a different reality. The anticipated wave of capital raisings never really materialised. While there was indeed a strong increase in June, with around R14 billion raised in that month alone, it was not much more than levels seen in previous years. Despite the meaningful uptick, there was no subsequent follow through, with July (R12 million), August (R47 million) and September (R184 million) all being significantly smaller.
In fact, on a cumulative basis, equity capital raised on the JSE in the first nine months of 2020 (to September) amounted to R29 billion, the lowest in the last five years.
The lack of capital raisings hasn’t gone unnoticed. The JSE is approaching regulators about listing instruments across a range of currencies including the US dollar. In addition, the Treasury said last week in an addendum to finance minister Tito Mboweni’s speech that it was in talks with stakeholders exploring measures to enhance South Africa as a gateway into Africa, as part of a broad initiative to modernise the country’s capital flow management framework.
While these developments provide innovative and cost-effective solutions for corporates with growth ambitions, they further underscore the fierce competition for capital. In order to differentiate yourself among from the multitude of companies vying for their fair share of assets under management, a deliberate and consistent approach to Investor Relations will ensure optimal use of management time, a clear and impactful investment proposition, shareholder support as well as a robust pipeline of investor demand.
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