As outlined in our previous updates, ASIC and ASX have provided numerous guidance updates, class waivers and concessions, on a temporary basis, to facilitate capital raisings of ASX listed companies during the COVID-19 health crisis.
These concessions are due to come to an end soon, however it is quite likely that these will be further extended. With continuing volatility in markets, resurgence of COVID-19 in Victoria and its continued growth rates globally, ASX listed companies should strongly consider whether now is an appropriate window to raise additional capital, either to repair balance sheets or for strategic purposes.
Based on ASX statistics, capital raisings rebounded strongly in April and May 2020, ostensibly driven by capital raising concessions. Since 1 March 2020, ASX is the most active exchange globally by total number of secondary offerings and is the second most active exchange globally by secondary capital raised. From March to May 2020, more than $20 billion in secondary capital raisings were announced by over 200 ASX-listed companies. ASX has had more companies access the market for secondary capital than NYSE and NASDAQ combined.
This success is underpinned by Australia’s A$3 trillion superannuation pool, a robust but flexible regulatory regime and efficient capital raising methods such as placements which can be completed in as little as 48 hours.
On 31 March 2020, ASX was one of the first exchanges in the world to implement temporary rule changes to facilitate emergency capital raisings against the backdrop of the COVID-19 pandemic. The concessions included:
a. increasing the placement capacity in listing rule 7.1 from 15% to 25%;
b. providing a temporary waiver of the 1:1 cap on non-renounceable entitlement offers in listing rule 7.11.3; and
c. accommodating back-to-back trading halts, in recognition that deals were generally taking longer to execute;
Whatever ASX may decide about an extension of the Listing Rule concessions it has granted in relation to capital raisings, and the Australian government does with their stimulus measures, it is certain that economic conditions will remain challenging and uncertain for a considerable period. We strongly encourage ASX listed companies to be very proactive about their capital management and look to raise capital – either to strengthen its balance sheet before there is an immediate need, or to position it to take advantage of future opportunities.
There may not be a more timely set of circumstances for ASX listed companies to raise capital than now.
GRT Lawyers will continue to provide updates on the impact of COVID-19 health crisis on capital markets as further information becomes available.