Wednesday 29 December 2021 7:19 am  |  Updated:  Wednesday 29 December 2021 7:30 am

Capital raising in the City picks up despite ongoing Covid disruption as listed firms pull in close to £25bn this year

By: Michiel Willems

UK listed companies have raised more than £12bn in new capital from investors in the second half of the year, bringing the total so far for 2021 between January and November to £24.7bn, according to data shared with Morning Wire

This represents the second highest total since 2009, following on from 2020 when £34.4bn was raised.

As Covid lockdown measures took hold in 2020, the City first saw corporates turning to their investors to rebuild balance sheets and capitalise on opportunistic growth opportunities, with capital raising reaching the highest level in a decade.

However, although strict lockdown measures have eased, capital markets activity has remained elevated compared to pre-pandemic levels.

Analysis of London Stock Exchange data on follow-on issues from investment bank Goodbody shows that in the second half of this year, 202 companies raised new capital.

Capital raising on London’s Alternative Investment Market (AIM) has been particularly strong, with £6.3bn raised in the year to date, the highest level since 2007.

“Two years into the pandemic, capital raising from UK-listed corporates continues at record pace,” said Piers Coombs, head of Goodbody’s London office.

Coombs told Morning Wire: “Whether sectors have been negatively impacted by the pandemic or have started to see green shoots of new opportunity in the past 12 months, the backing of investors has been invaluable to UK’s listed companies and their management teams.”

“This is likely to continue in the face of ongoing Covid-19 variants and we can expect capital markets activity to continue to operate above pre-pandemic levels in the coming year,” he continued.

Consumer, real estate and financials

Excluding listed closed end and open end investment vehicles that invest across a range of sectors, businesses in the consumer discretionary industry raised the most capital, at more than £5.5bn in the year to date.

This industry classification includes sectors such as automotive and household goods as well as the travel and leisure sector. This was followed by the real estate sector, which raised £2.9bn, and financials, which raised £2.5bn.

Travel industry struggles to find feet

The travel industry continues to be negatively impacted by travel restrictions and ongoing uncertainty, leading many in the sector to return to capital markets multiple times over the last 18 months.

The second half of this year, £2.5bn of further capital has been raised by companies in the travel and leisure industries, including some of the largest placings of the year to date.

This included EasyJet’s £1.2bn rights issue, designed to help fund its recovery from the pandemic.

TMT unearth opportunities

Not all industries have been negatively affected by Covid restrictions, and others that initially saw difficulties have more recently experienced green shoots of new opportunity.

Chief among these are technology and real estate.

In 2021, technology businesses raised a total of £1.6bn in follow on capital, often to fund growth strategies or acquisitions in the face of rising consumer demand.

In October, online security specialist Kape Technologies, raised more than £250m in an oversubscribed placing to facilitate its acquisition of ExpressVPN.

In July, Ascential, the information, analytics and eCommerce optimisation company, raised more than £150m to provide additional firepower for acquisitions in the face of a strong pipeline of attractive target opportunities.

In the real estate sector, changes to consumer behaviour have also led to significant inflows into listed investment vehicles.

Tritax Big Box REIT, which invests in warehouses and logistics assets, raised £300m in October.

Meanwhile, Home REIT, a provider of accommodation to the homeless, raised £350m in an oversubscribed fundraising in September.