Invesco’s co-heads of UK equities Mark Barnett and Martin Walker have said they will not support companies asking shareholders for extra cash without a “strong rationale”, according to reports.
The pair wrote to UK companies telling them they must come up with compelling cases for attempting to raise "precious and expensive" equity from investors, in a letter seen by Sky News. They said firms should first make use of Government schemes including the £330bn Covid Corporate Finance Facility (CCFF) before asking for support from shareholders.
The move comes as a number of top firms are expected to try and raise cash on the secondary market, with e-commerce giant Asos on Wednesday announcing it had successfully raised almost £250m through a share placing.
Barnett and Walker said: "In these times of unprecedented uncertainty and volatility, we have analysed financial statements focusing on cash flow, liquidity and debt maturities in order to take a view on whether the company will be required to raise capital to strengthen its balance sheet and ensure its future viability."
They added they were keen to support "the UK economy through the provision of long-term capital and essential market liquidity".
However, they continued: "Current market valuations mean that equity is both precious and expensive and should the company be required to raise short-term capital we would strongly advise you to examine any alternatives structures or facilities that may be available."
The letter comes after the Investment Association (IA) wrote to companies urging them not to suspend or cancel dividend payments "unnecessarily". The trade body added firms should consider their bosses' pay when deciding to tinker with dividends or slash employees' salaries.
The IA also accepted the likely need for companies to raise additional capital from its members in the coming weeks and months, urging firms to follow pre-emption group guidelines in the process.
The IA's director of stewardship and corporate governance Andrew Ninian wrote: "We will continue to work with regulators, lawyers and other stakeholders to consider ways to shorten the timetables, allowing companies to raise the capital they need more efficiently.
"In exceptional circumstances, a cashbox may be the only approach suitable for a company. We support the recent pre-emption group statement allowing companies additional flexibility under their guidelines on a case-by-case basis, for a limited time period.
"Shareholders would expect management to consider their views and not just be led by the views of its advisory banks.
"Shareholders would also expect companies to offer the placing to existing long-term shareholders, in the first instance. The decision to use cashboxes will be scrutinised in the usual way by shareholders at the time of the next AGM."