What is ASX BookBuild?

ASX BookBuild seeks to enhance current capital raising techniques and the integrity of the secondary market by:

  • giving all ASX brokers access to ASX BookBuild via existing ASX infrastructure;
  • having a bookbuild price that is live and visible to the whole market;
  • determining allocation of stock by a prescribed set of rules; and
  • facilitating strategic institutional stakes without compromising price.

ASX Bookbuild can be used by ASX listed companies for placements, IPOs and renounceable rights offers of financial products while also allowing retail investors to engage in capital raisings and IPOs through their broker in much the same way as trading shares.

What is a traditional bookbuild?

Under the traditional bookbuilding process, prior to finalising the issue price in an IPO or secondary capital raising an issuer or its investment bank 'built a book' by confidentially accepting bids off-market from select investors. After the close of the bookbuilding period, the bookrunner evaluated the collected bids on the basis of certain evaluation criteria and together with the issuer set the final issue price. Consequently, participation in a traditional bookbuild is often limited to certain classes of investors, and the allocation of shares between bidders is determined by the issuer and the bookrunner in their absolute discretion. The lack of transparency of this process often raised many questions about pricing and security allocation and not least, the effect of the process on good corporate governance.

How does ASX BookBuild operate?

Step 1: Company decides to do a capital raising using ASX BookBuild. Appoints Technical Lead Manager ("TLM") to conduct the offer on ASX BookBuild on behalf of the Issuer.

Step 2: Company and TLM set mandatory bookbuild parameters including the opening price, the proposed raising amount, the allocation to priority bidders and, if applicable, the minimum close price.

Step 3: The TLM is permitted to submit initial bids from cornerstone and other pre-identified investors who will be guaranteed to receive 100% of their requested allocation provided their bid price is at or above the final bookbuild price. At this stage the ASX BookBuild will also open to the wider market.

Step 4: ASX brokers submit bids on behalf of investors. While the bookbuild is open the TLM may amend certain parameters including the pricing, and allocation parameters.

Step 5: In much the same way as a live share price is displayed, ASX BookBuild determines the live bookbuild price which is visible to the market at large.

Step 6: Company and TLM close the bookbuild once satisfied with the final bookbuild price.

Step 7: Allocation of securities are made to bidders whose bids are at or above the final bookbuild price according to a defined set of rules that are applied in the same way to every capital raising using ASX BookBuild i.e. classes of bidders at or above the bookbuild price will be allocated a fixed percentage of their requested allocation as set out in the deal parameters set by the issuer and TLM.

Step 8: Securities allocated through ASX BookBuild are electronically settled through CHESS & notifications sent to custodians/registries.

Market Benefits

Under ASX BookBuild, issuers can choose to conduct all or part of the bookbuild for a capital raising in the open market. They will be able to increase their reach to include a greater number of investors as well as creating a process whereby allocations and pricing can be set in the interest of shareholders and conducted in a transparent process. However, whereas the new service may be beneficial to some companies who can be more relaxed about the make-up of their shareholder base, other listed companies may want more control over who is purchasing their shares for strategic reasons.

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.