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The importance of companies being able to raise capital in a
timely manner has been highlighted both during the GFC and by the
volatile markets which have persisted in its wake. When compared to
other forms of capital raising, such as placements, the process for
conducting a traditional rights issue is much lengthier and
accordingly can expose companies to greater market and pricing
risk, as well as increased costs.
In an effort to help ensure that "standard rights issues
remain a viable capital raising mechanism", on 3 July 2012 the
Australian Securities Exchange (ASX) released a consultation paper
entitled
Modernising the timetable for rights issues: Facilitating efficient
and timely rights issues in which the ASX outlines its proposal
to condense the standard timetable for renounceable and
non-renounceable rights issues from 26 business days to 16 business
days.
The ASX proposes that because it is "leveraging off
advances in systems, operational processes and technology",
the time period for each step of the standard timetable is able to
be reduced. The proposed timetable from the Consultation Paper is
set out below:
Step
Current timetable
Proposed timetable
Announcement date to ex date
2 business days (day 0 to day 1)
1 business day (day 0)
Ex date to and including record date
5 business days (day 2 to day 6)
3 business days (day 1 to day 3)
Trading period for renounced rights (renounceable offer
only)
14 business days (day 2 to day 15)
8 business days (day 1 to day 8)
Day after record date to and including date that documents are
sent to holders
4 business days (day 7 to day 10)
3 business days (day 4 to day 6)
Day after documents are sent to holders to and including
acceptances close date
10 business days (day 11 to day 20)
7 business days (day 7 to day 13)
Day after acceptances close date to and including issue
date
6 business days (day 21 to day 26)
3 business days (day 14 to day 16)
Total timetable
26 business days
16 business days
One significant aspect of the proposed timetable is to reduce
the period between the date that documents are required to be sent
out and the date that acceptances close. This change will limit the
time that shareholders have to consider the disclosure document and
the details of the offer, make their investment decision and
arrange for payment. As identified by the ASX, this concern may be
mitigated by the availability of the offer document electronically
on ASX's Market Announcements Platform, the use by many
companies and shareholders of electronic acceptance of the offer
and electronic methods of payment. However, foreign shareholders,
or shareholders who live in remote areas and who require a hardcopy
of the disclosure documents, may be disadvantaged by this aspect of
the proposal.
The ASX considers that a shorter standard timetable is expected
to increase the attractiveness of rights issues as a capital
raising mechanism through assisting to reduce costs, underwriting
risks, market execution risks and the size of the discount required
to raise the required capital. The ASX and others have argued that
it is important to ensure that rights issues continue to be a
viable capital raising mechanism so existing shareholders are
provided with the opportunity to participate in capital
raisings.
The proposal to modernise rights issues is part of a broader
suite of capital raising initiatives currently being pursed by the
ASX. As you may be aware, the ASX proposes to allow mid to small
caps to seek a 12-month shareholder mandate to issue 10% of issued
capital at a maximum 25% discount to market price and the ASX also
sought feedback in 2011 to make amendments to the ASX Listing Rules
to facilitate accelerated rights issues. The Consultation Paper
also flags options in the longer term for developing an even
shorter timetable for a rights issue that could be completed in
less than a week.
The ASX is seeking feedback on the impact of reducing the time
periods for each of the steps noted in the table above and on a
number of other questions which are outlined in the Consultation
Paper. Submissions are required to be lodged by 14 August 2012.
We have advised on many rights issues and would be happy to
assist you with any queries that you may have in relation to the
Consultation Paper.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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