Australia: ASX moves to reduce the timetable for rights issues

Capital Markets Alert: 20 Jul 2012
Last Updated: 25 July 2012

By Michelle Eastwell, Partner and Luke Dawson

The spotlight is once again on retail investors' participation in capital raisings. With companies having the ability to raise funds through a share placement within 24 - 48 hours, retail investors are often overlooked when undertaking capital raisings, as a rights issue or other retail raising involves a much longer timetable.

The ASX continues to focus on facilitating flexibility in the structure of capital raising mechanisms, and recently released a consultation paper proposing a reduction to the timetable for rights issues.

Here, partner Michelle Eastwell and trainee solicitor Luke Dawson outline the ASX's proposal to better accommodate the capital raising needs of listed companies.

Key points

  • The ASX consultation paper identifies a number of areas where there may be opportunity to reduce the timetable for traditional rights issues, reducing it to only 16 business days.
  • The consultation paper is relevant to traditional renounceable and non-renounceable rights issues. It does not address accelerated rights issues, which have been subject to separate consultation and will be finalised after this consultation process is completed.
  • The ASX has invited feedback on the proposed timetable changes, which must be lodged by 14 August 2012.

The proposed timetable

The consultation paper suggests that the timetable for rights issues could be reduced by more than a third, from a maximum timetable of 26 business days to 16 business days.

The reasoning behind reducing the timetable is that it will help companies to raise capital quickly and efficiently, and may also lead to other benefits, including reducing pricing discounts, lowering undertaking risk and related costs, and increasing the overall attractiveness of rights issues as a capital raising option.

The following is a summary of the ASX's proposed timetables:

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

The affect of the proposed timetable on rights issues

The ASX recognises that the reduced timetable would require the adoption of system, process or technological changes by both the ASX and other stakeholders, such as share registries, listed companies, custodians and brokers.

The ASX has invited feedback on the proposed timetable changes, including:

  • whether the reduction in the entitlement trading period to one business day is feasible;
  • what process or technology changes may be adopted to facilitate a reduction in the period between the record date and the date the documents must be sent out by;
  • whether it is feasible to send documentation to shareholders in more than one stage; and
  • whether the time period for acceptances of the offer could be reduced, given general acceptance and use of electronic acceptance and payment methods.

The ASX recognises that there may be a number of issues arising from introducing a shorter timetable, including the ability of market participants to respond to information and for shareholders in remote (or foreign) locations to participate. However, any such issues will need to be assessed against the potential benefits of a reduced timetable.

The ASX has also raised for consideration (in the medium to longer term) the possibility of developing a significantly shorter alternative timetable for rights issues, which would enable a rights issue to be undertaken in less than a week. The ASX is inviting comments on the feasibility of this timetable, as well as the issues that need to be considered in progressing such a proposal.

Submissions on the consultation paper may be made to the ASX until 14 August 2012.

© HopgoodGanim Lawyers

Award-winning law firm HopgoodGanim offers commercially-focused advice, coupled with reliable and responsive service, to clients throughout Australia and across international borders.

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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