$8.7b raised since start of year as improving market sentiment sparks slew of cash calls
By
Yang Huiwen
THE recent stock market rebound has led to a rights issue bonanza for local companies keen to capitalise on improving market sentiment.
In the first week of this month alone, at least five companies turned to shareholders for cash through a rights issue. And, from the start of the year to last Friday, some 22 Singapore-listed companies raised a whopping US$5.95 billion (S$8.7 billion) from shareholders this way.
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However, some say that the rise in the number of shares in circulation brought about by rights issues unduly penalises existing shareholders. They will see their holdings diluted if they choose not to subscribe and analysts usually advise them to subscribe for this reason.
This is well over the US$963.5 million raised from the eight issues over the same period last year, according to data compiled by Thomson Reuters.
The combined amount raised from the beginning of this year to last Friday is more than double the US$2.35 billion released from 23 issues for the whole of last year.
Analysts say the sharp improvement in market conditions has prompted the cash calls, which companies use to finance expansion, service debt, and reduce the level of debt on their balance sheets.
Shareholders are more willing to invest in a company when there is an uplift in sentiment. And firms as diverse as Neptune Orient Lines (NOL) and Dayen Environmental have taken advantage of this to raise cash in recent months.
The current window of opportunity could mean companies have been in a hurry to complete their rights issues.
They will also be mindful that shoring up a balance sheet with a successful rights issue is likely to benefit their share price as markets will no longer attach a risk premium to the stock, said CIMB research head Kenneth Ng.
NOL's recent issue was well-received by the investing community and its share price soared 9.8 per cent to $1.68 after $1.44 billion was raised to reduce debt and boost working capital.
However, some say that the rise in the number of shares in circulation brought about by rights issues unduly penalises existing shareholders. They will see their holdings diluted if they choose not to subscribe and analysts usually advise them to subscribe for this reason.
Read the full story in Tuesday's edition of The Straits Times.
