UK listed companies raise £7bn amid lockdowns, says Addleshaw Goddard
A recent surge in equity fundraisings shows that UK’s listed companies are still in a healthy state despite the challenges of Covid-19, according to a report by Addleshaw Goddard.
The corporate law firm, which has acted on eight fundraisings in the last eight weeks, says that while times are tough, fundraising activity is showing no sign of letting up, demonstrating the resilience of the market.
Since the UK’s Covid-19 lockdown was initiated in mid-March, over GBP7 billion of new money has been raised by UK listed PLCs. The majority, but not all, of equity raising transactions announced have involved small and midcap listed PLCs. So far, most of those transactions have not involved an offering to an issuer's retail shareholder base, meaning they can be undertaken in a very short timescale.
Giles Distin, a capital markets partner at AG, says: "These placings are a fast way for many UK PLCs to raise money. Since many of these transactions have no retail component, from a standing start they can sometimes be completed within a week, which holds obvious attractions for companies looking to shore up their balance sheets quickly."
The report says that many companies are not in desperate need to raise funds, but these equity raisings are one way for companies to build up a rainy-day fund in uncertain times.
Distin adds: "At the moment this surge appears mainly to be about institutional investors following their own money into companies where they are already invested, rather than see their equity diluted. At the same time, all this activity is demonstrating to other quoted companies that there is cash to be had, at least at the moment. Several companies are raising money whilst they can – because no one can be sure what tomorrow holds."
While the first wave of fundraising was mainly from the retail, consumer, and leisure sectors – some of those hit the hardest by the crisis – there is an expectation that more sectors will now join in.
Distin says: "This is without doubt the busiest period for non-IPO related equity fundraisings for many years, and it shows no sign of slowing. It is also a healthy reminder that listed companies have certain options open to them that private companies don't when it comes to raising money.
"Likely not many PLCs will look back and say coronavirus was good for business. But this does at least show that the London stock markets, and many UK PLCs, are in a pretty resilient state at the moment."