Avanguard Capital founder and managing director Patrick Kedemos talked with Proactive about the realities, risks and potential of capital raising for ASX-listed companies.
Kedemos explained why share prices often drop following a capital raise, citing three main reasons: discounted share pricing to attract investors, shareholder dilution, and selloffs from existing investors. He noted, “It’s a mix often of those three factors.”
Kedemos emphasised that a capital raise is not necessarily a negative signal. He encouraged investors to examine how the raised funds are being deployed. “If the funds raised serve to fuel the growth of the company… then it’s a good thing,” he said, cautioning that using equity to retire debt could be less beneficial due to its cost.
He outlined the characteristics of a well-executed raise, highlighting strong projects that increase future cash flows and reduce risk. Kedemos advised assessing whether a raise positively impacts a company’s net present value.
Reflecting on past experiences, he shared insights from both successful and failed raises, underscoring the importance of realism and due diligence. “You don’t fail, you either win or you learn,” he said.
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