ASX will start conducting bookbuilds for listed entity capital
raisings from 8 October 2013. The new facility will allow a
bookbuild for an equity placement to be conducted on-market using
ASX trading infrastructure.
Operation of the Scheme
In brief, the new scheme operates as follows:
Issuer appoints a lead manager: A listed entity
(issuer) will apply to ASX to use ASX BookBuild for all or part of
its capital raising, nominating an ASX Trading Participant as lead
manager to run the process.
Set bookbuild parameters: Certain parameters
are set in the ASX BookBuild program about acceptable bids. The
potential parameters include the opening price, the proposed
raising amount, the allocation to priority bidders and the minimum
Announcement of offer: The issuer must announce
to ASX the offer and certain public parameters such as the opening
and closing dates and whether retail investors are eligible to
Priority bids phase: The nominated lead manager
will collect "priority bids" for up to 100% of the shares
being issued. Priority bids are bids that receive a priority in the
allocation stages provided they are at or above the final bookbuild
On-market phase: The BookBuild facility then
goes "live" and other parties (through their brokers) can
bid for the shares on market. At this stage, priority bidders are
able to reassess their bid price to take into account the on-market
changes to the price.
Book is closed: Once the issuer is satisfied
with the issue price, the nominated lead manager advises ASX to
close the bookbuild, allocations are made to priority bidders and
then the remaining bidders based on bid price, and the placement is
settled via DvP settlement.
This on-market process would determine both the final price at
which the issuer offers shares and who receives allocations,
subject to the parameters set by the issuer. As a result, ASX
BookBuild is intended to operate more as an auction than a
traditional bookbuild process in which the issuer and the lead
managers can exercise broad discretion on pricing and
Access and costs
ASX BookBuild is available to all ASX-listed entities. The costs
of accessing the system are scaled based on the size of the capital
raising and whether a price improvement is achieved or the minimum
amount to be raised is exceeded.
All capital raisings will attract a fixed charge of $25,000.
Where a price improvement or a greater than minimum raising amount
is achieved, a scale applies. The maximum fee under the scale is
for a raising of more than $450 million which may attract a fee of
up to $1,997,500 plus 0.15 per cent on any amount over $450
It is yet to be seen what effect this may have on the pricing
structures of lead managers where ASX BookBuild is engaged to
conduct the bookbuild. We anticipate that lead managers will still
undertake an important role in underwriting issues, marketing
issues, obtaining commitments from priority bidders and advising
issuers on the bookbuild parameters and allocations.
Implications for Boards
ASX BookBuild may appeal to smaller issuers whose capital
raisings are not underwritten or who are reluctant to give lead
managers the pricing and allocation discretion that may apply in
Although ASX BookBuild seeks to obtain the best price, which on
its face would seem in the best interests of the company, it is
often the case that pricing and allocations in bookbuilds have a
strategic purpose beyond simple pricing, such as achieving a more
balanced mix of investors on the register or avoiding allocations
to investors who may not be perceived to be supportive of the
company in the long term.
It is also yet to be seen whether such a transparent bookbuild
process may have unintended effects on trading in the company's
shares in the placement aftermarket or amongst hedge funds
Boards considering a placement will need to balance the benefits
of the ASX BookBuild system against a more traditional placement
structure to assess what is in the best interests of the entity in
the prevailing circumstances of its need for capital.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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