Conditions for capital raising on the JSE may not be at their most conducive right now, given the stormy political and economic outlook sparked by the incarceration of former president Jacob Zuma. But last week two niche mid-cap counters raised more than R2bn in lightning-fast fashion — literally in just a few hours.
Warehousing property specialist Equites raised R1bn and specialist finance group Transaction Capital (TransCap) raised R1.17bn in accelerated bookbuild exercises that defied the overall dour mood on the market.
The speed at which the funds were raised confirms that investors still see great growth opportunities in companies that are tapping specific growth niches.
Market watchers canvassed by the FM say the fundraising success is not that surprising, considering the growth potential in both companies, offering an opportunity for institutional investors to quickly pick up large parcels of scrip.
On July 7 Equites announced its accelerated bookbuild proposals just before 8am, setting a target of about R500m in new capital "subject to pricing acceptable to the group". Less than 4½ hours later, Equites, citing strong demand from investors, doubled the size of the bookbuild.
By 1.30pm Equites had raised the R1bn by issuing 55.6-million new shares at R18 a share. The offer price was not far off the 30-day share price high of R18.92 seen the day before the bookbuild was announced.
The next day, just after the market closed, TransCap announced a nonpre-emptive cash placing of up to 33-million new shares (roughly 5% of its existing issued shares) to certain institutional investors.
Before the market reopened TransCap disclosed it had completed its bookbuild, which was "multiple times oversubscribed".
The new shares were placed at R35.50 a share — only a 4.7% discount to the pre-launch 30 business day volume-weighted average price of R37.25, and just 4.4% down on the closing price of R37.15 before the bookbuild was announced.
For Equites — which has attracted market interest in SA and the UK — equity capital raising has been fairly common of late. The total equity capital raised in the past 16 months is R800m via bookbuilds, and another R700m via dividend reinvestment plan alternatives. The group also raised R800m in debt capital markets during 2020.
The latest injection of capital is not for shoring up the balance sheet, but to invest in a pipeline of development and acquisition opportunities locally and abroad.
In the UK, these include a super-hub developed for luxury brands business Hermès at a total cost of £72m and a last-mile fulfilment centre for online retailing giant Amazon at a cost of £41m. Equites has also confirmed negotiations with a global e-commerce provider to develop a £200m facility in Basingstoke in the UK.
Locally, Equites is acquiring (from property group Attacq) a half share in two high-quality logistics properties and undeveloped land at Waterfall City in Midrand for R445m. A distribution site for Cotton On will jointly be developed with Attacq.
TransCap, meanwhile, enticed the market with its lucrative and innovative vehicle financing venture, SA Taxi.
The group says it continues to identify investment opportunities in adjacent markets and related asset classes, arguing that its technology, proprietary data and analytics capabilities allow it to generate attractive risk-adjusted returns.
Driving the bookbuild, though, appears to be the September 2020 transaction in which TransCap snapped up a 49.9% stake in online vehicle retailer WeBuyCars. TransCap recently increased its stake in WeBuyCars to 74.9%, and part of the capital raised in the bookbuild will be used to fund this deal.
TransCap said a portion of the R1.1bn raised would give "financial flexibility and strategic agility to execute on opportunities resulting from market dynamics pursuant to the Covid-19 pandemic".
The group said its main operations, SA Taxi and Transaction Capital Risk Services (TCRS), were both well reinforced; SA Taxi was adequately capitalised with ample liquidity available in undrawn debt facilities to fund expected loan origination into financial 2022.
At TCRS, the group indicated that as market dynamics become clearer, the acquisition of nonperforming loan portfolios in SA, Australia and Europe could provide opportunities to accelerate capital deployment plans within the division. TransCap stressed that TCRS’s funding requirements for the acquisition of such portfolios into financial 2022 are already secured.
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