After first flagging the possibility of introducing shorter timetables for “traditional” entitlement offers in 2012 (see our article here) and consulting on standardised timetables for accelerated entitlement offers in August 2011, ASX has released exposure draft amendments to the ASX Listing Rules which will provide:
- standard timetables for accelerated entitlement offers (that is, where offers made to “institutional” investors are conducted within the first few days after announcement of the offer but the terms of the offers, including the offer price, are otherwise essentially the same); and
- shortened timeframes for traditional entitlement offers (that is, non-accelerated entitlement offers that are made to all shareholders in the same timeframe).
Currently, the ASX Listing Rules only stipulate timetables for traditional entitlement offers. Issuers proposing to conduct an accelerated entitlement offer (such as an accelerated, renounceable entitlement offer), must seek waivers from certain Listing Rules before making the offer to ensure that it is treated as a “pro rata” offer for the purposes of the Listing Rules. The accelerated entitlement offer timetables proposed by the draft amendments are largely consistent with current market practice, and so should mean that all types of offer may now be undertaken without the need for prior ASX waivers. An issuer will still need to consult with ASX to ensure compliance with the published timetables but detailed consultation is only likely to be required:
- where the first day of the trading halt for the offer will be the expiry date for any exchange traded options quoted over the issuer’s securities (proposed new listing rule 3.20.3); or
- where the offer is an AREO with rights trading, in which case the usual consultation with the issuer’s listing officer is recommended to ensure smooth trading occurs.
The current traditional, or non-accelerated, entitlement offer timetables that are provided in Appendix 7A of the Listing Rules will also be shortened from 26 to 19 business days. ASX has stated that this development is to help ensure that non-accelerated offers remain a viable capital raising alternative. However, even with these changes, in volatile capital markets “traditional” entitlement offers will still compare unfavourably with accelerated entitlement offers and institutional placements and we do not expect the changes to have a significant impact on the relative attractiveness of traditional entitlement offers.
The proposed amendments are subject to a public consultation process and will be implemented no earlier than January 2014.
Proposed accelerated entitlement offer timetables
The new Appendix 7A to the ASX Listing Rules will include standard timetables for:
- accelerated non-renounceable entitlement offers (ANREOs or JUMBOs, when accompanied by an institutional placement of additional shares) - these are accelerated entitlement offers in which eligible shareholders who do not take up their entitlements, or those who are excluded from participation due to being in an ineligible jurisdiction (ineligible shareholders), are not able to trade their entitlements and do not have their “entitlements” sold through a bookbuild process;
- accelerated renounceable entitlement offers (AREOs) - accelerated entitlement offers where a bookbuild is conducted after each of the institutional and retail offers for the purposes of selling any entitlements renounced by eligible shareholders and those of any ineligible shareholders, with any premium for those received above the offer price to be paid to those shareholders;
- simultaneous accelerated renounceable entitlement offers (SAREOs) - same as the AREO, except that there is a single bookbuild undertaken after close of the retail offer; and
- AREOs with retail rights trading - same as the AREO except that eligible retail shareholders are entitled to trade their entitlements on ASX during a short period before close of the retail offer. Also known as a PAITREO or AREORT.
Click here to view table.
The new accelerated offer timetables (outlined above) are largely in line with current practice. One notable exception, however, is the minimum period during which retail offers must be open. Currently, ASX requires retail offers to be conducted over a minimum of 10 business days, however this will be reduced to 7 business days under the amendments. This is a minimum period only and some entities may still decide to give retail shareholders longer to respond to an entitlement offer. For example, some issuers may consider a longer offer period to be in the interests of investor relations or consider that a longer period may contribute to higher take-up.
ASX considers the shortened retail offer period appropriate in light of its objective to increase the attractiveness of entitlement offers as a means of raising capital, and given that most entitlement offers are now made with limited disclosure (acknowledging the widespread use of the ”low-doc” procedure provided for under section 708AA of the Corporations Act and ASIC Class Order 08/35). Also, with offer announcements and documentation available on the ASX online market platform and payment methods such as BPAY now routinely available, the time periods required for retail shareholders to participate are decreasing.
Another difference to note is that the period from the close of the retail offer to the issue of securities has been reduced to a maximum of 5 business days for offers without back-end bookbuilds (i.e. ANREOs) and 8 business days for offers with back-end bookbuilds. These maximum periods are slightly shorter than the periods currently seen in many accelerated offers. Issuers and underwriters should be mindful of this difference when organising logistics at the end of the offer, e.g. when determining cut-off times for accepting cheques to ensure adequate time for cheque clearance ahead of settlement.
ASX recognises that waivers from the new timetables may be necessary in some circumstances. For example, the new timetables reduce the time that issuers have to send documents to shareholders (from 4 business days to 3 business days). However, companies with large registers may still require 4 business days to send documents to shareholders.
Proposed amendments to non-accelerated entitlement offer timetables
The new timetable for traditional entitlement offers would reduce the standard process from approximately 26 to 19 business days.
Click here to view table.
The most significant amendment with regards to the traditional entitlement offer timetables is that the minimum rights trading period will be reduced from 14 business days to 8 business days. ASX considers that this reduction is appropriate given that rights trading volumes in these offers are generally relatively low. In any event, most rights trading occurs at the end of the period so the shorter period is unlikely to impact investors’ ability to sell their entitlements. Rather, the new timetable will concentrate rights trading in the later days of the shorter period.
There are two additional points to note:
- since the time between the “ex date” and the record date has been reduced by 2 business days, the anomaly that previously existed whereby a person could acquire shares “ex” entitlement, but then still appear on the register at the record date, thereby creating confusion about whether they should have entitlements has been removed with these changes; and
- in response to feedback, ASX agreed to reduce the period of notice required to extend an offer period from 6 business days to 3 business days. This will also apply to accelerated offers.
Future amendments to the traditional entitlement offer timetable
ASX has flagged the possibility of reducing the timetables for traditional rights offers even further after 2016/2017, provided that:
- the improvements flagged by the RBA’s strategic review of innovation in the payments system, which would facilitate the use of “real time gross settlement” by retail shareholders, have been implemented; and
- ASIC and the Federal Government have agreed to allow the universal electronic dissemination of offer documentation.