Equity market round-up: A great time to raise capital
It might have been the most turbulent month in memory for global stock markets but equity capital raisings did not grind to a halt. In fact, September has seen a spate of equity raisings from banks despite, or rather because of, the fact that they are at the centre of the market’s turbulence.
The banks that sold equity can be divided into two groups: those selling shares to shore up capital ratios such as Goldman Sachs, Morgan Stanley and Natixis; and those selling shares to pay for acquisitions that have been agreed such as Barclays, Lloyds TSB, Commerzbank and Deutsche Bank. The fact that they were successful in their marketing efforts despite the condition of the markets is testimony to the "you can sell anything at the right price" mantra of syndicate bankers.
Goldman raised $10 billion through a public placement of shares and the sale of $5 billion in preferred stock to Warren Buffett’s Berkshire Hathaway. The deal might have been as good as one could think of for the priceless effect on confidence that it had but the financial price was high. Goldman had to pay Buffett a 10% dividend and promise attractively priced warrants.