ASX and ASIC have announced “Temporary emergency capital raising relief”.
The relief, which expires at the end of July 2020, provides for placement capacity of 25% where a raising is conducted alongside an entitlement offer or SPP.
The relief, if used, will result in significant dilution for some – particularly retail shareholders and institutional shareholders not invited to participate – or where the entitlement offer is small.
Control implications of capital raisings are also exacerbated – a 19.99% placement combined with sub-underwriting could result in a single holder having a position beyond 30%.
A “supersized waiver” can also be used which would increase the placement capacity to 50% where a one-for-one entitlement offer is undertaken.
The liberal nature of the relief places the onus on boards to ensure raisings are conducted fairly – and not merely in a way suiting investment banks and their favoured clients.
The report can be downloaded by clicking on the following link: Capital-raisings_Emergency-relief.pdf