Should Exchanges Allow Larger and More Discounted Placements? An Analysis of Changes to ASX Listing Rules

37 Pages Posted: 30 May 2014 Last revised: 12 Oct 2014

See all articles by Mark Humphery-Jenner

Mark Humphery-Jenner

UNSW Business School; Financial Research Network (FIRN)

Jo-Ann Suchard

UNSW Business School; Financial Research Network (FIRN)

Date Written: October 7, 2014

Abstract

This paper analyzes the desirability of relaxing constraints on non-pro-rata share issuances and examines amendments to Australian listing rules that have done so. The Australian Stock Exchange (ASX) recently amended its listing rules to allow small-cap companies to issue up to 25% of their share capital at a discount of up to 25% (up from 15% issue at a 15% discount), if the company satisfies certain requirements (including approval of a supermajority of shareholders). The new changes have the potential to distort the shareholder-register. Further, if the equity issue is made to an existing blockholder (or blockholders), the super-majority requirement for the issue to take-place may only require a minority of non-blockholder-shareholders to agree. However, existing directors’ duties and shareholder remedies should be sufficient to protect shareholders from abuse of the new rules. Thus, they could provide additional flexibility to firms who may require significant capital-injections in order to undertake major investments or raise capital to stave-off financial distress.

Suggested Citation

Humphery-Jenner, Mark and Suchard, Jo-Ann, Should Exchanges Allow Larger and More Discounted Placements? An Analysis of Changes to ASX Listing Rules (October 7, 2014). CIFR Paper No. 017/2014, Available at SSRN: https://ssrn.com/abstract=2443201 or http://dx.doi.org/10.2139/ssrn.2443201

Mark Humphery-Jenner

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Jo-Ann Suchard (Contact Author)

UNSW Business School ( email )

high street
High St
sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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