ASX provides a solid platform for capital raisings
ASX consistently ranks among leading exchanges globally for equity capital raising. In the five years from 2008 to 2012, World Federation of Exchanges (WFE) data shows that ASX was ranked 4th in the world for total equity capital raised by listed issuers.
Innovative and flexible capital raising mechanisms
Listing on ASX provides the opportunity to raise capital at the time of listing and on an ongoing basis through a range of innovative and flexible capital raising mechanisms. ASX has been at the forefront in developing a capital raising rule framework that caters for the capital needs of companies at all stages of their growth.
Examples of ASX initiatives include:
- the facilitation of accelerated entitlement offers that allow companies to raise capital quickly and efficiently from institutional shareholders while at the same time affording smaller shareholders the opportunity to participate in the issue on similar terms according to a traditional timetable;
- a proposal to reduce the rights issue timetable to improve the timeliness of capital raising but ensure the inclusiveness of all shareholders;
- an increased facility for smaller companies to raise capital subject to annual shareholder approval; and
- introduction of ASX Bookbuild, an optional tool that provides the opportunity for all eligible investors and ASX Participants (brokers) to participate in the bookbuild.
A reduced Rights Issue timetable
Consistent with the objective of providing listed companies with flexible and efficient capital raising options, there is an initiative underway to reduce the timetable for standard entitlement offers (both renounceable and non-renounceable) from 26 days to 19 days. This would involve reducing the ex-period from 5 days to 3 days and applying that reduction to all other corporate actions that have an ex-period (except calls, conversions and expiries) to ensure consistency across all timetables. This initiative seeks to better balance listed companies’ need for timely capital raising mechanisms and the opportunity for existing shareholders to participate in the capital raising. It is subject to regulatory approval and will not become effective prior to 2014.
Accelerated entitlement offers
Although accelerated entitlement offers have been facilitated for a number of years, it is proposed that new timetables be included in the ASX Listing Rules (subject to regulatory approval) to provide for greater certainty to issuers and to reduce administrative processes currently associated with these issues.
ASX capital raising rules
On 1 August 2012, amendments to the ASX Listing Rules came into effect to facilitate capital raising by small and mid-cap listed entities and strengthen ASX’s position as a leading global exchange for emerging companies.
The framework allows small and mid-cap companies to:
- Issue up to 15% of their issued capital without shareholder approval (Listing Rule 7.1)
- Issue an additional 10% of their issued capital (at a maximum 25% discount to the market price) within 12 months of shareholder approval (Listing Rule 7.1A)
- Make additional issues within three months of shareholder approval (Listing Rule 7.1)
Listing Rule 7.1A applies to small and mid-cap companies with a market capitalisation of $300 million or less and which are not included in the ASX / S&P 300 Index. ASX publishes a list of companies in the ASX / S&P 300 Index twice yearly on re-balance date.
The Listing Rule amendments were introduced to provide a viable capital raising option for capital-intensive listed companies by enabling small and mid-cap companies to issue an extra 10% of their issued capital within 12 months of shareholder approval, minimising the need to seek shareholder approval on regular occasions through the year.
ASX BookBuild is an additional tool for brokers and investment banks to consider when advising listed entities, or entities seeking to list, on how to price and allocate new securities.
ASX BookBuild utilises existing ASX systems and infrastructure and provides a bookbuild process that creates the opportunity for all eligible investors and ASX participants (brokers) to participate in the bookbuild. It can be used for IPOs, placements and renounceable rights offers.
Further information about ASX BookBuild is available at www.asx.com.au/bookbuild