Speculation that the market for capital raisings may soon become exhausted was premature, Freehills partner Philippa Stone has told ALB. “There are structural features of Australia’s regulatory environment that encourage saving or even make it mandatory – for example, superannuation laws,” said Stone. “This provides stable sources of funds for equity investment.”

However, Stone said that a slowdown in capital raisings was possible as the need for such raisings may diminish as the economy recovers. This will result in a larger proportion of capital raisings motivated by growth opportunities. Stone contrasted this with the capital raisings spurt over the past 12 months, which she said was driven by companies wanting to raise equity due to declining net asset values from revaluation, in combination with banks being reluctant to lend. Stone said firms have generally adopted more conservative balance sheets.

Meanwhile, the raisings are continuing at least for the present. Freehills has announced it will be advising Australian residential developer Devine on a A$66m capital raising. Stone said Devine is using its recent capital raising to pursue growth opportunities arising from favourable market conditions in the residential sector.