The rush of capital raisings reflects a market-wide strategic mistake.
Almost all players who had a raising on the radar earlier this year opted to wait it out until conditions improved. Higher share price = better cost of capital.
Now, many are in a bind. Asciano's experience epitomises the dilemma. Had it not dithered in the hope of a recovery it may have fixed up its balance sheet with minimal dilution. Now it faces massive dilution, a high-cost raising.
Many others are in the same boat. Transfield is contemplating a $200 million issue. Incitec Pivot is planning to raise money. Transpacific is rumoured to be doing the soundings.
And Westpac, CBA and ANZ will be yearning for more capital now that NAB has moved.
For the banks there is a simple equation. If one bank puts equity in the tin, it immediately seizes a cost of capital advantage over its peers. You can see it in the relative stock prices already.
But there was a piquant aroma hanging heavy in the air after NAB's move.
Despite its neat timing and a placement pitched successfully at a relatively slight discount, NAB executive director Ahmed Fahour flogged $3.2 million worth of shares only a week before the lightning hit.
This is nothing short of a disgrace. Freshly armed with the comfort of a government guarantee, Fahour sold 130,000 shares last Monday at $24.78 apiece. The placement price yesterday was $20 a share.
The bank came forward with a lame excuse today. "Normal clearance process involving the chairman, the CEO and the company secretary'' etc.
Well the chairman, the CEO and the company secretary have just dudded shareholders. What a bad look it is to deliver such an advantage to Fahour when there was a capital raising around the corner.
If they contend they suddenly thought of it having realised they needed $2 billion (it was $3 billion in the end thanks to strong demand), that shows such poor judgement they should walk.
It's either poor ethics or poor judgement. Either way it's a poor look.
mwest@fairfax.com.au
