In response to public consultation in July 2012, ASX has recently put forward a set of proposals that will reduce the timetable for traditional rights issues from 26 business days to 19 business days. ASX has also put forward specific timetables for various accelerated rights issue structures.
The key changes for traditional rights issues are:
- the period for acceptances will be reduced from a minimum of 10 business days to 7 business days;
- the trading period for renounceable rights (for renounceable offers only) will be reduced from 14 business days to 8 business days;
- the period to issue the securities after acceptances close will be reduced by 1 business day to 5 business days; and
- the period for the issuer to despatch documents will be reduced from 4 business days to 3 business days
Market participants strongly supported shortening the timetable for traditional rights issues. The purpose of the amendments is to ensure that traditional rights issues remain a viable capital raising mechanism compared to, for example, private placements which can be executed rapidly. The reduced timetables should also result in a reduction of execution risk for issuers given the reduced period during which market conditions could adversely impact on the capital raising.
However, not all of the amendments proposed in the July 2012 consultation have been taken up. Specifically, the proposed amendments shorten the traditional rights issue timetable by 7 business days only, rather than by 10 business days as originally proposed. Further, ASX does not propose to reduce from 2 business days to 1 business day the period from the announcement of the rights issue to the ex-date (in other words, ASX will not reduce the cum entitlement trading period to 1 business day only). The reason for this is that shortening the period would have created difficulties for investors in foreign time zones.
ASX will also introduce standard timetables for various types of accelerated rights issues, given that none are currently included in the ASX timetables. These will include accelerated non-renounceable entitlement offers (ANREOs), accelerated renounceable entitlement offers (AREOs) / simultaneous accelerated renounceable entitlement offers (SAREOs) and accelerated renounceable entitlement offers with retail rights trading (AREORTs). Currently, accelerated rights issues are facilitated by ASX granting customary and usually uncontroversial waivers. The introduction of standard timetables, avoiding the need for ASX waivers, will be welcomed by participants. As we noted in our article on the July 2012 Consultation Paper (link here), ASIC has already issued class order relief to enable certain accelerated rights issues under Class Order 08/35.
The relevant timetables proposed are:
- a period of 18 business days for ANREOs;
- a period of 21 business days for AREOS and SAREOs; and
- a period of 22 business days for AREORTs.
One aspect that ASX did not progress from its July 2012 consultation is the introduction of a significantly shorter timetable for rights issues using electronic dissemination of disclosure documents and methods of acceptance and payment. ASX considers that further reductions in the timetable will require improvements in the payment system to facilitate real-time retail payments with close to immediate funds available to the recipient. The RBA has identified the ability to make real-time retail payments (among others) as an objective to be achieved by the end of 2016 and in conjunction with this the ASX considers that there is merit in working with ASIC and the government to progress the matter in the future.
It will be interesting to see whether the changes (if adopted) would see greater use made of rights issues. Placements are still likely to remain attractive to companies seeking further capital given their greater relative simplicity. It will also be interesting to see how a shorter timetable would impact rights trading activity.
Implementation of the changes will not occur before January 2014 as the implementation will require development work and testing by ASX. We will keep you updated about important developments.