‘Nobody Ever Forecasts For Zero Revenue'

With increased capital-raising activity on the JSE, investors should monitor their holdings that are under pressure.

- Simon Brown

Capital raising by listed companies on the JSE is breaking records. As I write this (in the last week of June), we’ve had some R5bn of book builds from Harmony, Pepkor and Transaction Capital and more than R10bn of proposed rights issues (some mooted, but not yet confirmed).

There are many reasons for this activity. In the case of City Lodge, for example, it is being done to bail out its BEE deal. Curro, on the other hand, is suggesting potential acquisitions, but the education provider also has debt – as does Sun International and TFG. Mr Price doesn’t really need cash but is considering a R3.6bn rights issue to bolster its balance sheet, and Sasol has cautioned about a possible $2bn issue if required – but there hasn’t been further word on this likelihood.

This raises a few questions for investors as well as some important points to consider.