VICTORIA GEDDES, Investor Relations

It is hard to find consensus on to what extent the Australian capital markets will be open for IPOs and secondary raisings in 2024. There does, however, seem to be a view that there are likely to be positive factors that will help to mitigate the uncertainty that stymied access to capital in 2023. In view of this, there are several Investor Relations activities that can be undertaken now to ensure companies are well positioned for any improvement in market activity.

Interest rates to stabilise

The rapid rate tightening cycle by the Reserve Bank Australia, which saw 13 rate hikes from May 2022 to November 2023, is expected to conclude in the first half of the year, followed by an expectation of easing monetary policy in the latter part of 2024. This is supported by the shift in monetary policy by the US Federal Reserve in December when Chairman Jerome Powell stated that rate increases “were not the base case anymore”.

Amongst Australia’s big four banks the Commonwealth Bank of Australia and Westpac are forecasting a first interest rate cut in September 2024, while ANZ is predicting it will be in November 2024 and NAB thinks it will not be until December 2024. Stability around Australian monetary policy is seen as a positive, as is the effect of the recent rate rises in helping to control inflationary pressures within the Australian economy.

Stability and certainty

While there remain significant geopolitical tensions across the globe, a potential benefit from some stability returning to the outlook for Australian interest rates and inflation, is that it provides a degree of certainty for Australian business. This helps drive confidence to invest in capital projects, which in turn may increase demand for access to capital.

Greater certainty around interest rates and borrowing costs can also give the market more confidence to support companies’ investment plans. Higher rates mean access to money is not as easy as it was during the extremely low rate, post GFC environment or the Government bailout days of COVID, so investors are more discerning. When money isn’t cheap investors are more likely to assess investment opportunities based on a company’s fundamentals and investment thesis rather than a sector thematic.

Tools in the IRO’s kit bag

In this context, companies that need to access capital need to be sure they are effectively communicating their investment case to shareholders and potential investors. An effective Investor Relations team has many levers they can pull to help optimise a company’s access to capital, be that via IPO, Placements, Rights Issues or Share Purchase Plans. These include:

1. clear and accessible communication of a company’s strategy, and how the funds raised will support the execution of that strategy, is fundamental
2. if there is sufficient lead time, a perception audit may identify gaps in the market’s understanding of the investment opportunity which can then be addressed as part of the communication strategy
3. clarity of the messaging can be enhanced with professionally designed, supporting materials, be that physical documents or online collateral
4. connecting directly with retail shareholders through a targeted engagement plan to ensure that they are aware of the raising, understand how to participate and can raise any issues/ask questions that will help support their decision
5. targeting new investors is integral to any IR programme so using this activity to build a database of potential shareholders facilitates the process of raising capital and results in a register that is supportive of the company’s growth strategy over time.

Bespoke campaigns for capital raising

FIRST Advisers has been supporting companies with their capital raising campaigns for over fifteen years. Our approach has always been to design a campaign that fits each company’s specific objectives rather than apply a standard template of services. This is because we offer the full range of IR services in-house, so we are agnostic as to which ones will deliver the best outcome for the client. We have IR advisers with lengthy careers in investor relations as well as deep experience working in financial markets; an in-house design and creative team to ensure the messaging is effectively communicated; an in-house call center to run effective proxy solicitation campaigns that ensure as many shareholders as possible are aware of and can participate in a capital raise; and our market leading registry analytics team, which delivers beneficial ownership analysis for companies ranging from small-cap to Top 100 companies, is skilled at global and local investor targeting.

FIRST Advisers has the expertise, experience, and the tools to design and execute the right campaign in support of any capital raising so get in touch if you would like to know more.