Just a quick question to clear up a concept that I'm a little foggy on.
There's a lot of capital raising going on at the mo, and a whole heap more expected (apparently). Now, I can't imagine that the big swathe of issues are because companies are looking for cash to invest somewhere or to expand the business - I'd presume it's got more to do with cleaning up balance sheets and altering debt to equity ratios / leveraging levels.
My questions are:
1. Am I right in the above - is all of the raising due to reinforcing the business's finances given the erratic and unsure future? If not, why so much capital raising and why now?
2. When fresh capital is raised, does this dilute the shareholders equity already on issue? There will be far more shares for the same level of profit earned by the company next time a dividend is declared (I understand that the newly issued capital should be made to earn some form of return, but if it's been raised primarily to reduce leverage then this return would be negligible, no?).
If the above is generally the case, how do share prices behave following a capital raising? Presumably they're going to take a dip?
Also, how exactly do companies go about a capital raising? Is it a tender process or what? Surely there must be a lot of arbitraging going on around a capital raising as the company tries to match what the current market value is?
Thanks in advance,