Ensure retail investors don’t miss out on your capital raising
Sponsored article: 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 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 timeframes.
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.
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.
In 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.
Computershare understands that it’s vital that companies get their offer to retail investors right. 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.
Note from the author, Computershare’s Ann Bowering: 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.
For more information visit www.computershare.com/au/capitalraising