The Australian Securities Exchange and cash-strapped junior exploration companies are hoping a new stock market tool will encourage investors to get more involved in capital raisings.
The Australian Securities Exchange and cash-strapped junior exploration companies are hoping a new stock market tool will encourage investors to get more involved in capital raisings.
The ASX Bookbuild system, launched today by the stock market operator and privately owned firm On-Market Bookbuild, is designed to make capital raising processes, including placements and initial public offerings, more transparent for investors.
The system will allow eligible investors to bid on discounted shares without having to go through a company-nominated broker.
Companies seeking capital will still appoint a lead manager and set the parameters for the raising, including opening price, the proposed raising amount, allocations to priority bidders and the minimum close price.
Nominated brokers will coordinate priority bids at, or above the final bookbuild price, prior to the facility going live on-market.
The tool is expected to be attractive for companies issuing capital raisings that are not underwritten, or are reluctant to allow lead managers discretion over pricing and allocation.
On-Market Bookbuild chief executive Ben Bucknell said the tool would open up new investment opportunities for Australia’s $1.6 trillion superannuation pool, including $154 billion held in cash and short-term deposits within self-managed super funds.
But Hartley’s head of corporate finance, Grey Egerton-Warburton, said only time would tell if the bookbuild tool would be of any use.
“It may prove to be an opportunity for some companies, and for some brokers,” Mr Egerton-Warburton told Business News.
“However, the control given away in the process may dissuade many companies.
“Many boards are very, very focused on who is allotted shares in a capital raising, with an eye to who, or what entity, might appear on the share register.
“It may not be of much use to smaller companies, where demand generally has to be generated by pretty targeted contact and advice.”
Association of Mining & Exploration Companies chief executive Simon Bennison said equity finance in the mineral exploration sector was extraordinarily tight and hoped the new tool would encourage investors to become more engaged in capital raising activities.
Mr Bennison said the tool would give explorers and miners more control over the pricing and allocation of a capital raising, as well as increase access to market demand.
“Given the decreasing number of IPOs and average amount raised for metals and mining companies, this is a timely and useful facility for the industry,” Mr Bennison said.
“We look forward to this being road-tested to assess the benefits to mineral exploration and mining companies.”
