Predictable really. PLCs are taking advantage of the huge run-up in their stock prices from their March lows to tap shareholders for more cash.
On Friday morning, housebuilder Taylor Wimpey announced plans to raise £510m via a placing and open offer that will dilute existing shareholders by 33 per cent, while 3i, the quoted private equity group, is asking its shareholders to back a 7-9 rights issue to raise £700m.
The recent price action in Taylor Wimpey.
and 3i.
That brings the total amount of cash raised by UK companies through the equity market this year to around £30bn.
So who else might be tempted to try their luck at the City of London ATM?
Barratt Developments, another heavily indebted housebuilder, must be one leading candidate, along with one of the more highly geared pub companies such as Enterprise Inns or Punch Taverns (aka the Toxic Pub Company). And what about Yell? The directories group is struggling under £4.5bn of debt, £3bn of which has to be refinanced by 2010.
BT, Travis Perkins, National Express, ITV, Lonmin and property company Brixton are seen as other possible users of the ATM by analysts.
The key question now is whether there will be any push back from institutional investors, who must be suffering rights issue fatigue, at this point. Are they going to advance cash to every ailing company that pitches up? One supposes the answer will come down to whether they believe in the green shoots of recovery. The fact that Taylor Wimpey has been able to get £500m underwritten suggests they do.
Of course, the fact that more or less every company that launches a cash call is rewarded with a nice share price spike also helps. On that note, shares in Taylor Wimpey are up 21 percent at 44p in early morning trading.
Related links:
3i and Taylor Wimpey in cash calls – FT.com
Shareholders become choosy on rights issues – FT.com