Open season for IBs and takeovers by stealth: Emergency capital raising relief

By Jessica Wallace

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