In a timely move given the ongoing and very topical discussion about capital raising structures, in particular the use of rights issues and retail investor access to capital raisings, ASX yesterday released a consultation paper proposing a reduction in the standard rights issue timetable of 10 business days – from a maximum timetable of 26 business days to a maximum timetable of 16 business days.
ASX has also sought to open a longer term discussion about the possibility of adopting an even shorter timetable for rights issues of under a week to achieve a rights issue timetable that is competitive with a placement timetable.
The timetable proposal is being considered to maintain the standard rights issue as a viable capital raising mechanism by seeking to strike a balance between companies' need for timely capital raising mechanisms and providing existing shareholders with the opportunity to participate in the capital raising.
The focus of the consultation paper is traditional rights issues – both renounceable and non-renounceable – as opposed to accelerated rights issues. In 2011 ASX consulted on Listing Rule changes to facilitate accelerated rights issues including standardised timetables. ASX will not finalise its rules in relation to accelerated rights issues until after this consultation on shorter timetables to allow any amendments to the traditional rights issue timetable to be taken into account.
Click here to view is the overview table from the consultation paper:
The consultation paper seeks feedback in relation to a number of issues in relation to the proposed timetable, including:
- is one day of cum entitlement trading sufficient
- what is the impact of reducing the period between the ex date and the record date on the settlement systems and processes of market users and what impact would it have on common market transactions such as stock lending arrangements
- are there available processes and technology to reduce the period between the record date and the despatch date
The key issue from retail investors’ point of view will be whether the proposed timetable gives appropriate balance to:
- the opportunity for retail investors to participate in capital raisings; and
- the practical realities of the time required to make an investment decision and respond to the offer. A shorter offer may make the use of cheques a practical impossibility, although BPAY could perhaps be a compulsory alternative.
Submissions are due to ASX on Tuesday, 14 August 2012.