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The Australian Securities Exchange (ASX) recently released a
consultation paper setting out proposed changes to the timetable
for traditional pro rata rights issues which would reduce the
timetable by more than a third, from a maximum of 26 business days
to a maximum of 16 business days.
The
Consultation Paper, which comes on the heels of new capital
raising rules which allow certain small and mid-cap companies to
issue a further 10% of share capital on an annual basis as well as
a relaxation of the shareholder spread requirements for new
listings (see our recent eAlert on these changes
here), further reinforces ASX's stated commitment to
strengthen the equity capital market and enhance the flexibility
and efficiency of capital raising mechanisms.
Key timing changes
The proposed changes to the rights issue timetable are
summarised in the following table:
Step
Current timetable
Proposed timetable
Announcement date to ex date
Two business days (day zero to day one)
One business day (day zero)
(Reduced by one day)
Ex date to and including record date
Five business days (day two to day six)
Three business days (day one to day three)
(Reduced by two days)
Trading period for renounced rights (renounceable offer
only)
14 business days (day two to day 15)
Eight business days (day one to day eight)
(Reduced by six days)
Day after record date to and including date that documents are
sent to holders
Four business days (day seven to day 10)
Three business days (day four to day six)
(Reduced by one day)
Day after documents are sent to holders to andincluding
acceptances close date
10 business days (day 11 to day 20)
Seven business days (day seven to day 13)
(Reduced by three days)
Day after acceptances close date to and including issue
date
Six business days (day 21 to day 26)
Three business days (day 14 to day 16)
(Reduced by three days)
Total timetable
26 business days
16 business days
Comment
ASX has recognised that, while 'fair' to all
shareholders, traditional pro-rata rights issues take considerable
time to complete in comparison with other capital raising
mechanisms, such as an institutional placement which can take a
mere one to two days. By reducing the rights issue timetable, ASX
is seeking to ensure that rights issues remain a viable capital
raising option for companies that need to raise capital. This is
important as rights issues provide all shareholders, especially
retail shareholders, with the opportunity to participate in capital
raisings without the dilutionary effect of a placement. The
proposed changes would improve the attractiveness of rights issues
as they are expected to reduce the size of any discount required to
raise the necessary capital as well as save costs. The changes
would also reduce the time which a company (and an underwriter to a
rights issue) will be exposed to any volatility in market
conditions.
The timetable changes take into account the use of electronic
communication and more efficient processes. A note of warning
around the proposed timetable – it will give
shareholders, especially retail shareholders, a shorter time in
which to consider whether to participate in the offer. This could
have the inadvertent effect of reducing acceptances.
Impact on accelerated rights issue
ASX previously conducted a separate consultation process in
relation to accelerated rights issues which was designed to enable
companies to carry these out without having to apply for waivers
from ASX. ASX proposes to finalise the listing rule amendments in
relation to the timetable for traditional rights issues prior to
addressing the changes required for accelerated rights issues. This
will avoid any inconsistency.
Closing date for feedback
ASX is accepting submissions in relation to the Consultation
Paper until 14 August 2012.
Here to assist
If you wish to make submissions to the ASX addressing any of the
issues set out in the Consultation Paper, we would be happy to
assist.
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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Women citation acknowledging our commitment to workplace
diversity.
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