Interview
Raising Capital: How Companies’ Financing Strategies Are Changing In Volatile Markets
- The Federal Reserve is expected to implement six to seven interest rate hikes over the year.
- Equity markets are projected to face ongoing challenges from volatility, sector rotations, and valuation shifts, while leveraged finance markets are anticipated to stay robust due to sponsor activity.
- Market volatility is likely to be driven primarily by geopolitical events, such as those involving Ukraine and Russia, rather than Federal Reserve announcements.
- Companies facing volatile conditions may utilize alternative financing methods, including follow-on offerings for those with outstanding debt, while undervalued stock issuers are expected to prioritize share repurchases.
- Financing pipelines are projected to grow despite execution challenges, with private markets offering robust opportunities through PIPES, non-registered transactions, and convertible debt.
- SPAC activity is expected to be significantly more challenging, with merger partner hunts continuing for approximately 600 entities despite redemption rates reaching roughly 80%.
- SPAC performance and valuation are anticipated to shift toward profitability, reflecting a re-rating of growth and a changing market tone.
- Unprofitable technology companies are expected to encounter increased uncertainty and pressure within the rising interest rate environment.
- Spinoffs are forecast to remain a prominent strategy, specifically the "shrink to grow" approach, to optimize capital structures and management focus.
- Corporates with substantial debt are expected to maintain interest coverage through a trend of lengthening duration, while companies with strong balance sheets may pursue classic M&A growth by acquiring undervalued targets.
- Strategic financing in 2022 will include growth investments, with some entities viewing spinoffs as defensive measures.
- Corporate activity regarding domestic and global footprints is expected to evolve in response to geopolitical developments.
- ESG standardization is anticipated to improve as regulators and governments pursue greater transparency and consistency.
- The carbon offset market is expected to gain promise once consistent standards for project evaluation are established.
- Digital asset tokenization is projected to expand into real estate and hard assets beyond securities, with increased on-chain issuance for institutions building on the proof of concept of the first digital bond.