Fund Monitors Pty Ltd
© Copyright 2024
Printed: 13 April 2024 9:50 PM


9 Jun 2022 - Is this a buying opportunity?

By: Equitable Investors

Is this a buying opportunity?

Equitable Investors

May 2022

There was a brief period following the March 2020 COVID-19 market panic when funding looked like it would be hard to come by and companies did whatever it took to raise cash. But central bank liquidity flowed and equity capital followed. In 2022 things are different. After taking funding for granted for many years, we expect many businesses are going to become increasingly desperate for cash as the year progresses.

The $US146 billion of equity capital raised globally in the March quarter of 2022  sounds like a huge number but was down 69% from $US476 billion a year earlier and 58% from the December quarter (using dealogic data). The current quarter is running lower still.

We have identified almost 400 "cash burners" on the ASX (ex resources). Nearly half of these cash burners did not have the funds to make it past 12 months based on their March quarter cash burn. It may not be a complete surprise to you that the sector with the most companies facing one year or less of cash funding is Software and Services. Biotech and Health Care unsurprisingly represent nearly 30% of these companies.

The great opportunity in this is for investors to identify situations where capital availability can make a huge difference to valuation, either in isolation or with a few changes and greater fiscal discipline. We think this "recapitalisation" opportunity is a huge opportunity and an exciting time for a firm such as Equitable Investors that applies bottom-up, fundamental research and constructively engages with companies.

We are inviting follow-on and new investments in Dragonfly Fund to pursue such opportunities over the next 12 months. Applications (for wholesale investors only) can be made here.

Funds operated by this manager:

Equitable Investors Dragonfly Fund


Nothing in this blog constitutes investment advice - or advice in any other field. Neither the information, commentary or any opinion contained in this blog constitutes a solicitation or offer by Equitable Investors Pty Ltd (Equitable Investors) or its affiliates to buy or sell any securities or other financial instruments. Nor shall any such security be offered or sold to any person in any jurisdiction in which such offer, solicitation, purchase, or sale would be unlawful under the securities laws of such jurisdiction.

The content of this blog should not be relied upon in making investment decisions.Any decisions based on information contained on this blog are the sole responsibility of the visitor. In exchange for using this blog, the visitor agree to indemnify Equitable Investors and hold Equitable Investors, its officers, directors, employees, affiliates, agents, licensors and suppliers harmless against any and all claims, losses, liability, costs and expenses (including but not limited to legal fees) arising from your use of this blog, from your violation of these Terms or from any decisions that the visitor makes based on such information.

This blog is for information purposes only and is not intended to be relied upon as a forecast, research or investment advice. The information on this blog does not constitute a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Although this material is based upon information that Equitable Investors considers reliable and endeavours to keep current, Equitable Investors does not assure that this material is accurate, current or complete, and it should not be relied upon as such. Any opinions expressed on this blog may change as subsequent conditions vary.

Equitable Investors does not warrant, either expressly or implied, the accuracy or completeness of the information, text, graphics, links or other items contained on this blog and does not warrant that the functions contained in this blog will be uninterrupted or error-free, that defects will be corrected, or that the blog will be free of viruses or other harmful components.Equitable Investors expressly disclaims all liability for errors and omissions in the materials on this blog and for the use or interpretation by others of information contained on the blog

Australian Fund Monitors Pty Ltd
A.C.N. 122 226 724
AFSL 324476
Email: [email protected]