As listed companies scrounge for capital following the ASX relaxing limits on raises, the Australian Shareholders Association (ASA) has urged directors to protect shareholder interests and practice transparency.
The ASX on Tuesday granted temporary emergency capital relief to listed entities, recognising that many companies will urgently need the capital to sustain them as the effects of coronavirus take hold.
The measures extended by way of class waivers, will allow companies to raise up to 25 per cent of their market capitalisation, up from the previous 15 per cent – as long as companies also run a share purchase plan for retail investors.
It will also permit trading halts of up to four days, increased from two previously, allowing companies to consider, plan for and execute a capital raise.
The ASA has said it is aware that some companies have and will need to raise capital to combat immediate and potential effects of the pandemic, but it has recommended that company directors practice oversight to make sure the raises are fair to shareholders.
It has called for prorate non-renounceable offers with repatriation of the proceeds of an exercised rights to compensate shareholders who are unable to participate during the crisis.
It has also emphasised transparency, saying companies need to review their guidance and update or withdraw it where it no longer applies and investors should be given a sense of how the crisis is affecting them.
ASA chair Allan Goldin commented “it is up to the directors”.
“In relation to reviews of earnings guidance, we see the withdrawal of guidance that is no longer valid as a matter of urgency,” Mr Goldin said.
“And further we expect comments withdrawing guidance to provide supporting comments that go beyond ‘due to the uncertainty’ and provide a sense of context.”
The ASX class waivers will expire at the end of July unless the ASX otherwise decides to remove or extend them.
Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth.
Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio.
You can contact her on [email protected].