Scope to improve rights issues

By ASX

ASX has consulted on reducing the timetable for rights issues, to help ASX-listed companies raise capital faster and cheaper, whilst balancing the needs of investors and market participants. Twelve of 19 submissions ASX received are publically available.

The July 2012 ASX consultation paper, ‘Modernising the Timetable for Rights Issues', identified several potential reductions in the rights issue process that together could reduce the current maximum timetable from 26 business days to as low as 16 business days.

The ASX media release on the rights issues initiative is available here.

The consultation paper is the first step in making the rights issue process more efficient for ASX-listed companies. ASX will consult further in coming months with stakeholders, such as share registries, listed companies, companies and brokers, which have key roles in the rights issues process.

“Shortening the rights issues process is one of several changes by ASX to make a range of capital-issues mechanisms as efficient as possible,” says Diane Lewis, ASX senior policy analyst, regulatory and public policy, and author of Modernising the Timetable for Rights Issues. “The process still has a long way to run, but potential time-savings identified so far are encouraging.”

Another key change this year is allowing ASX-listed companies outside the S&/ASX 300 index, and with a market capitalisation of $300 million or less, to issue a further 10 per cent of their issued capital on a non pro-rata basis, provided certain conditions are met.

“ASX’s goal is to provide ASX-listed companies with the widest possible range of capital-raising mechanisms that are world-class in their efficiency and execution,” says Lewis. “Ultimately, companies choose which form of equity capital raising best suits their circumstance at the time.”

Lewis adds: “We know that during and following the GFC timely access to capital has been a high priority for companies and that more volatile global equity markets create more execution, pricing and market risk for companies that take longer to raise capital. We also know that in a globally competitive market, companies have a greater choice where they raise capital.”

Lewis says a potentially shorter timetable for right issues will help ASX-listed companies reduce market risk (by not having the capital raisings open as long) and maximise price discovery.

If implemented, the proposal will also ensure rights issues remain a viable equity capital raising mechanism. The last significant change to the rights issue timetable was in 2003. “We want to ensure the right issues takes full advantage of changes in technology, systems and operational process since then, and that it remains a valuable tool for ASX-listed companies,” says Lewis.

The length of time it takes to complete a right issue is one reason why more companies have tended to favour placements to raise equity capital in recent times.

Lewis says ASX is also planning on introducing changes to ASX Listing Rules to provide standard timetables for accelerated rights issues, which was consulted on last year.