Why the market is digesting Enbridge Inc’s $2B equity offering easily

For people who had doubts concerning the markets’ capability to digest large equity offerings, they can take a look at the $2 billion common share offering by Enbridge Inc.

The deal, the second by the company in the past 1 . 5 years, was announced after markets closed on Wednesday. The task for the underwriters was to place 49.14 million shares at $40.70. Given that the underwriters received a 7.371 million over-allotment option, the challenge ended up being to find buyers for that base deal (49.14 million shares) and also the option. In most, the task ended up being to find buyers for 56.511 million shares worth $2.3 billion of Enbridge shares. (Prior to this deal, Enbridge had 867.6 million shares outstanding.)

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Enbridge Inc willing to grow through acquisitionsEnbridge set to raise $2 billion of equity that will meet its needs ’till the end of 2017

Judging by where Enbridge’s shares are trading at on Thursday morning C they have traded in the selection of $41.65 to $43.70 – we are able to safely conclude that the issue had no trouble finding buyers. (Enbridge closed Wednesday at $43.16.)

So what is the key?

There are four key factors in the success of a deal: the caliber of the issuer (as well as on that measure Enbridge, whose dividend yield is in the 5 per cent range, is well known); the size; the price, and the discount to the recent trading price (Enbridge was costing a 5.70 per cent discount to Wednesday’s close of $43.16.) Get one factor wrong and all sorts of hell breaks loose; get everything right and it’s like money for candy.