With the COVID-19 pandemic restricting economic activity
around the world, companies are facing earnings uncertainty and are confronting
the need to make tough financial decisions. Capital raisings are fast becoming
a necessity for those who are looking to shore up their balance sheets.
To date, the Australian market has led the world in new
capital raisings through the pandemic, with offers in excess of $15 billion
hitting the market since the beginning of March this year. Significantly, nearly
three quarters of these have been offered at a deep discount to the current
market price. While the bulk of the capital raised in Australia has been via placements
to institutional investors, it is important that issuers also consider ways to
ensure that retail investors don’t miss out on an opportunity to participate in
an offer where they believe there is value, and equally, that they have the
chance to minimise any dilutionary impact the placement may otherwise have had
on their investment.
In addition, proactive and timely temporary changes to the
capital raising rule framework announced by the ASX early in the crisis lowered
barriers for issuers to access the market, encouraged the use of proportionally
participating offers, and streamlined the process across the market.
It is for these reasons that we are seeing companies launching
offers in the current market, typically in the form of a Share Purchase Plan
(SPP) or a Rights Issue, with a focus on how they can best reach their retail
investors effectively, providing them with the opportunity to efficiently
subscribe for new shares and minimise the effects of dilution.
Another theme of the capital raisings that we have seen completed
so far has been the need for scale backs due to oversubscriptions, which sends
a positive signal around investor appetite and sentiment to the market.
Often it is easy to overlook the practicalities of what it
takes to execute a capital raising, but one of the key elements of the process
is the mailing of offer documents, and the return mailing of offer acceptances.
Australia Post plays a key role in all of that. So when the limitations of
COVID-19 recently triggered Australia Post to announce changes to their mailing
procedures, it has a flow on effect for corporate actions, heightening the
risks associated with the physical mailout of offer materials. Of course, these
challenges can be further complicated where there are shortened offer
Issuers can help to mitigate this risk by using a
multi-channel approach, increasing the reach of your capital raising campaign
and maximising participation. Companies who use email, a dedicated application
website, and an outbound call campaign, have a greater chance of their message reaching
and resonating with their target audience. It also presents a good opportunity
to engage with your shareholders in a more meaningful way and enrich your
shareholder information, which can be used in proactive campaigns and to reduce
communication costs in the future.
92.9% of eligible registry interactions between
Computershare’s local issuer clients and their shareholders in March taking
Our experience shows that Australian shareholders are comfortable
with interacting digitally, with 92.9% of eligible registry interactions
between Computershare’s local issuer clients and their shareholders in March
taking place online. Many of our clients, having successfully implemented
mandatory direct credit for their investors, are now targeting mandatory e-comms
as the next digital frontier.
addition, companies making use of an online application site, will
assist their eligible shareholders to access the offer materials, apply online
and make an electronic payment. This simplifies the application process while
providing a seamless user experience for shareholders. One of the unique benefits
of using a digital portal is that you can also accept payments online, meaning
you receive your funds in hours, not days or weeks, removing any uncertainty
surrounding the physical mail process. We
have worked with issuers to adopt an electronic-only payment approach,
foregoing cheque payments entirely, delivering a more efficient process for our
clients and their investors.
Raising capital in these times requires a deep understanding
of rapidly changing market conditions, regulatory frameworks, execution
strategy, and the resources to back it up. Having recently been a Managing Director
of an ASX listed company, I know firsthand the priorities and concerns an
issuer faces when coming to the market for new capital. With that knowledge,
and now my insight into the workings of Computershare, I can confidently say we
are the experts in complex corporate transactions who will set you up for
success by ensuring your capital raising message reaches all of your valued
investors – big and small.