Trading Halts and Capital Raising:
The Purpose vs the perception
Whether you invest in the Australian Stock Market (ASX) or not, a trading halt has the potential to sound ominous and worrying, however it’s not so uncommon in volatile economic climates and is more considered as a viable channel for organisations to take to protect their businesses and its shareholders. We are seeing many companies voluntarily suspend trading in a bid to accelerate recovery and secure their future.
Victory Offices had a one and a half month trading suspension in April and following that time off, announced the success of securing $15 million in Capital Raising. The funds raised will be used to strengthen the company’s balance sheet to manage the ongoing impact of COVID-19 and to fund working capital requirements of the business over the next 12 months.
What is capital raising?
Capital Raising is the ability of an individual or company to raise funds in order to get the business off the ground or help in the daily operations of the business.
CEO Dan Baxter stated, “the equity raising announced today, alongside operation and cost saving initiatives, will position Victory Offices to overcome adversities associated with COVID-19 and current market conditions.” It is a step in Victory Offices’ COVID-19 recovery plan and said to put Victory in a stronger position than their competitors.
It is not only Victory Offices that has had to halt trading and undertake strategies such as raising capital to place them in a better position as business conditions improve. Local and global companies are doing the exact same. For example, retail and services business – Kogan (ASX:KGN), vitamins group – Blackmores (ASX:BKL), and health food company – Freedom Foods (ASX:FNP), have also implemented a trading halt. Just last Thursday, Australian airline – Qantas (ASX:QAN), announced a trading halt and a capital raising of $1.9 billion to accelerate its recovery and position itself for new opportunities.
Although some may view a trading halt and efforts to raise capital as a sign of insecurity, it more so reveals the corporate support a company has gained. When a company has secured capital, it shows that investors see potential in the company’s future growth trajectory and the ability to sustain rapid revenue growth.
Victory Offices have now re-opened on the ASX market and their recent equity raising has positioned them to weather the situation that COVID-19 has caused the commercial real estate industry. According to Baxter, Victory forecasts an occupancy rate of 20% up to September, rising to 50% of “pre COVID-19 levels” by December and 80% by June 2021. Exceedingly promising statistics within 12 months for all invested both personally and financially with Victory Offices.
During this unprecedented period, it is crucial that companies deem it necessary to strengthen their balance sheets and liquidity position as the road to recovery will be long. These are a sign of the times and as more companies have their business operations severely disrupted due to ongoing COVID-19 government regulations, it won’t be surprising to see more trading halt and capital raising announcements on the ASX. Let’s just hope they all result in a positive outcome such as this one.
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