RON CAMERON, Investor Relations.
The need to engage shareholders directly as a result of Recent Changes to Capital Raising Requirements
‘May you live in interesting times’, which is often characterised as a Chinese curse, has never been as relevant as it is today, in the time of COVID-19.
Personal circumstances have been turned upside down during the Coronavirus pandemic and, equally, corporate priorities have changed dramatically. In particular, the urgent requirement for many companies to ensure their balance sheets are insulated from a prolonged economic downturn.
Both ASIC and the ASX have come to the rescue, implementing immediate changes to capital raising requirements for listed companies.
Those changes can be summarized as follows:
ASX Initiatives (in place until July 31st unless extended)
- Listed companies will not require security holder approval to go past the 1:1 cap on non-renounceable rights issues. This will assist underwriters in managing their risk.
- Temporary increase in the Placement capacity from 15% to 25% of currently issued capital. This will allow more security holders to participate in capital raisings. However, access to the increased limit is conditional on either making a follow-up pro-rata entitlement offer or an SPP at a price equal to or lower than the Placement price.
- In addition, ASX will now allow two consecutive trading halts of two trading days each, to allow underwriters more time to bookbuild and assess any financial impacts.
- ASIC will now allow placements, entitlement offers and SPPs to proceed without a prospectus to entities which have been suspended for no more than 10 days in the past twelve months. This doubles the usual 5-day limit.
The Impact on retail shareholders
In all likelihood retail shareholders are going to be inundated with a plethora of documentation linked to capital raisings, similar to what happened in the weeks and months post-GFC.
They will need to made quick decisions on where to allocate a limited amount of investable funds and will also, more than ever, need to be given some attention by those companies asking them for money.
Additional requirements for companies raising capital
Companies that wish to be ‘front of mind’ when the retail shareholders on their register are making their investment decisions will need to proactively engage with those investors. They will also, following ASX’s compliance update issued on Wednesday 22nd of April 2020, need to keep records on:
- the approach they took in identifying investors to participate in any placement under the Temporary Extra Placement Capacity Waiver,
- how they determined their respective allocations in the placement, and
- how they made best efforts to allocate pro-rata to existing investors.
Companies will have 5 days from completing a placement to submit an electronic spread sheet showing full details of the investors to whom securities were allocated and the number of securities they were allocated, including any zero allocations.
How a Retail Shareholder Engagement Campaign Adds Value
A proactive campaign can serve as a follow up to the shareholder documentation sent to investors in relation to an Offer, and as a reminder and ‘call to action’ for shareholders to participate in the capital raising.
In our experience, typically 20% or more shareholders will not receive the documents sent to them, let alone read the material and act. That 20% generally translates into a significant number of shareholders that could potentially participate in the Offer and maximize the funds raised! Put simply, it would only take a handful of additional participants in the offer to cover the cost of the campaign.
Based on extensive experience, our statistics show that proactively engaging shareholders increases retail participation (funds raised) by, on average, 30% compared to a ‘do nothing’ approach.
A shareholder engagement campaign for a capital raising exercise also creates an opportunity to collect and update contact details from retail investors, and provides an avenue for them to share their feedback on the company – all in a cost effective manner.
FIRST Advisers’ point of difference
FIRST Advisers principal business is investor relations, so communicating with shareholders is our forte. Unlike most of our competitors who have links to established share registries, FIRST Advisers is totally independent. This independence means we worked closely and seamlessly with all the share registries, while also holding them to account on behalf of our clients when necessary. In other words, we act with total transparency on behalf of the companies we work for.
We optimise our shareholder engagement campaigns by offering a dedicated online chat facility alongside our, Australian based, in-house call centre. Our online chat functionality is not a service offered by any share registry or competitor and it allows us to push live to shareholders the information and documents they require, including personalised offer documentation and links to online subscription logins.
FIRST Advisers has also developed Access IR, a proprietary, leading edge Investor Relations CRM platform. This platform allows us to capture and update shareholder data and investor details on an electronic platform and easily generate electronic reports to help clients meet compliance obligations.