Returns on new capital issuance during the pandemic period
2020 has demonstrated the resilience of equity capital markets faced with an unprecedented crisis.
Over the course of the year so far, equity capital markets have shown that their primary function continues to work extremely well – to allow companies to raise capital and, in this instance, to do so quickly (aided by fast moving and pragmatic regulatory changes).
Amid economic and political turbulence, London’s capital markets have enabled listed/quoted companies (excluding IPOs) to raise £20.5bn, an 79% increase on the £11bn raised in the same period of 2019 and the second-highest amount raised in the last 24 years.
Investors have seen significant returns, with a c.28% simple average return on all placings in the period 2 March to 9 October 2020 (compared to 1% over the same period in 2019), clearly rewarding those who have continued to invest at a time of unprecedented risk and uncertainty.
These stellar returns have been driven in particular by companies in the small and mid-cap space (with market capitalisations between £10m and £500m), which represent more than half of the placings by number over the period, and which have rewarded investors with an average simple return of c.33%.
Dru Danford, Head of Corporate Advisory at Shore Capital, said:
“This data demonstrates the strength and resilience of equity capital markets here in the UK, and their increased importance at a time when many companies needed additional capital to replenish and strengthen their balance sheets. Participating investors have been rewarded as demonstrated by the returns generated during this time.
“It is clear from the support provided over this difficult period that business requiring growth capital should be attracted to public markets to provide their growth capital in the future. And with a significant period of change as we have seen during the pandemic, it is small and mid-cap companies that have been able to use their agility to be disruptive and adaptive. If you take, for example, Clipper Logistics – a company Shore Capital was appointed broker to at the start of the crisis – you can see the ways in which the company has been able to utilise existing technology and online logistics expertise to pivot quickly to providing the goods and services most needed in a moment of national crisis, such as PPE for the NHS and online shopping and delivery services. Its share price as a result has risen by 261% from 135p at the beginning of March to 488p at 30 September.
“It is also worth noting that the relaxation of pre-emption rights from 1 April has allowed for much faster and cheaper issuance for Main Market companies, which was critically important in the midst of the crisis. While this relaxation is currently slated to end in November, it may be worth exploring a further extension or permanence (in line with prospectus rules) given the benefits over this period.”
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About Shore Capital
We are an independent securities business offering institutional and corporate clients leading investment banking, research, sales and trading services, including fixed income. We are represented across the UK enabling extensive distribution and institutional coverage. This distribution capability is complemented by our experienced corporate advisory and broking team who offer discreet, innovative and valued advice to companies on both the Main Market and AIM. Shore Capital is also the 3rd largest market maker by number of AIM stocks covered.
Our cross-disciplinary team has deep, market leading experience in a wide range of small and mid-cap UK companies within the following sectors: Consumer, Financials, Healthcare, Insurance, Natural Resources, Real Estate, Support Services, Technology and Media. Our research on over 250 companies is distributed to an extensive institutional client base in the UK, Europe and US.
Shore Capital is a trading name of both Shore Capital Stockbrokers Limited and Shore Capital and Corporate Limited.