ASIC doubles retail shareholders’ maximum investment in SPP’s

A recent announcement around raising the Share Purchase Plans’ (SPP) cap by ASIC (Australian Securities and Investments Commision) has certainly caught attention. ASIC Corporations’ (Share and Interest Purchase Plans) Instrument 2019/547 will see the maximum investment from a retail shareholder double from $15,000 to $30,000 – allowing them to increase their participation in SPP’s as well as the potential for companies to increase the capital raised from retail investors, and thus reduce the need to look outside their shareholders.

This simpler, faster, less expensive way of raising money will also mean less dilution for smaller shareholders and allow companies to possibly look to run SPP’s rather than placements.  

For example; for a securityholder to hit a $30,000 take up in an entitlement offer, it would need to hold an approximately $100,000 parcel of shares in a 1 for 3 offer or an approximately $200,000 parcel of shares in a 1 for 6 offer. Given that most retail securityholders won’t have stakes in any one entity of that magnitude, this latest announcement will allow even more retail securityholders to be able to take up more than their pro rata stake through an SPP offer than in the past.

It’s hard to say what kind of impact this development will have on secondary capital raisings going forward, and it remains to be seen whether this extended cap will begin to steer boards away from entitlement offers ad lure them towards SPP alternatives and institutional placements.

Will we see more capital raisings from companies as well in general? Macquarie is one company that has recently employed the dual route of capital raising, to good effect. With the aim of ‘stocking the war chest’, they launched a $1 billion institutional placement on the 28/9, which completed quite quickly. However, they took the step of also selling shares to retail shareholders through a share purchase plan, aiming for $600 million as the Share Purchase Plan concludes on the 20th of September. 
News of this dual capital raise and the successful placement has been well received by the market, with a 4.01% total increase in share price since the announcements, with the SPP still yet to conclude.  

Reach Markets’ own in house Share Purchase Plan team has helped six ASX listed companies run SPP’s over 2018/2019 – with the majority of cases resulting in a 20%+ participation from the existing registry. These SPP’s resulted in up to 300%+ more capital raised than expected.

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