SA is set to see a wave of equity fundraising as banks’ capacity to lend is under strain from rising bad debts, just as corporations are in need of funds to cope with the fallout from the coronavirus pandemic.
“The economic environment is not going to be conducive any time soon and debt levels will increase over the next six months,” said Simon Denny, head of Barclays SA. “I am surprised that SA is not seeing any major equity capital raises.” In August, cement maker PPC’s shares nosedived as investors hammered it after a rights issue announcement. In July, Famous Brands backed away from plans to raise equity after its announcement provoked a similar backlash.“Generally, there is a higher level of resistance by shareholders for dilution,” said Richard Stout, Standard Bank’s head of equity capital markets for SA and Sub-Saharan Africa.
“Banks are getting risk averse, which will make several listed entities raise equity,” said Muhammed Naasif Darsot, CEO of AllJoy, which is pursuing multiple strategies to raise the capital needed to grow its business.
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