Capital raising relief on the way
(28 March 2020 – Australia) The Australian Securities Exchange (ASX) and Australian Securities and Investments Commission (ASIC) have announced plans to increase the level of equity companies can raise to help avoid a credit crunch and reinforce their balance sheet.
Regulators plan to increase placement capacity to 25 percent of shares on issue, up from 15 percent, inferring corporates can raise larger equity values to help survive enforced business hibernation brought about by the coronavirus pandemic.
Cochlear and oOh!media have already undertaken placements in equity markets as CFOs and corporate treasurers canvas appropriate short term funding sources to withstand the undefined duration of the COVID-19 pandemic. An increase to the limit would require a change to ASX Listing Rules and the change may encourage strategic investors or private equity firms to establish stakes in distressed companies.
"Placements are a great source of capital for companies, especially in a volatile market as the raises are typically open and closed within 8 to 24 hours and don't require the preparation and timeframe of a prospectus” stated Fresh Equities CEO Ben Williamson.