Firms undertake fundraisers to either survive or exploit coronavirus crisis
As the coronavirus pandemic continues to roil markets and send the global economy grinding to a halt, some firms have decided now is the time to ask investors to open their wallets with multiple groups having undertaken fundraisings in the last week.
However, while some companies are raising fund to potentially take advantage of opportunities exposed by the downturn, other are hoping the funds will shore up their balance sheet just enough for them survive the unfolding economic collapse.
On Wednesday, the FTSE 250 firm, which also operates food and drink outlets in airports and train stations, raised £216mln after warning the pandemic could cause its revenues for March to drop by between 40%-45% while also knocking £50-£60mln off its operating profit.
The group has also closed shops, sacked staff, reduced salaries and is negotiating rents to save money.
In other sign of the times, temporary seating specialist Arena Events Group PLC (LON:ARE) moved to support its balance sheet with a £9.5mln share placing on Thursday in addition to a £4.75mln loan from HSBC.
Arena has been hit hard by the cancellation of all sporting and social gatherings, including two of its biggest events the Wimbledon tennis championship and The Open golf tournament.
However, following the cash call the company has said it is now in a strong financial position to weather the current crisis.
At the other end of the spectrum, some firms are taking advantage of the crisis to raise cash as their sectors look set to profit from changes to business and consumer behaviour brought on by quarantine measures.
MelodyVR is a platform that allows music fans to watch live concerts in virtual reality regardless of their location, a situation that has become reality for many in recent weeks as government quarantine measures have banned mass gatherings and shut down concert halls across the world.
The AIM-listed firm raised £14mln in what it said was a “heavily oversubscribed” placing to fund the trial of its interferon-beta treatment in coronavirus patients.
The treatment, SNG001, is an inhaled formulation that is currently being developed to treat people with chronic obstructive pulmonary disease (COPD) by protecting their lungs against viral respiratory infections such as coronavirus.
The group’s goals have also been appreciated by investors in the wider market, with Synairgen’s share price having soared 703% since the start of the year to 47.2p.
Looking ahead, it is likely more firms on shaky financial ground may need to tap the market to bring in more cash.
On such firm is Africa-focused airline Fastjet PLC (LON:FJET), which in a trading update on Wednesday said it was suspending its operations in Zimbabwe after both the country and neighbouring South Africa introduced travel bans to contain coronavirus.
As of 23 March, the group’s cash reserves were at US$2mln (£1.7mln), and on 12 March said it had agreed with its main creditors to defer payments on loans, saying it expected to have enough funding to last until June, however, the grounding of its fleet is likely to increase its cash burn which could put this time frame in doubt.
Finally, while it may need to approach the market for funds, it could be a little too late for troubled shopping centre owner Intu Properties PLC (LON:INTU), which has been battered yet again as the UK’s coronavirus lockdown and store closures have led to a plunge in footfall at its sites.
The company said on Thursday that it is renegotiating its bank covenants and the cash from the sale of its Puerto Valencia shopping centre in Spain, around £95mln, has also been delayed.
With a previous £1.5bn emergency fundraiser fell through at the start of March, it is unlikely that the company has any ammo left to tap the market, and may instead have to pin its hopes on the government’s £330bn support package to help its commercial tenants pay their rent.