Tool improves pricing disclosure of new issues

A new capital raising tool, which is expected to give boards greater confidence that the pricing of new issues is appropriate, goes live on 8 October 2013.

This ASX BookBuild facility will be offered by brokers and investment banks to companies listed on the Australian Securities Exchange (ASX) and according to its developers On-Market BookBuilds, it could lower the cost of capital to companies and improve disclosure around the pricing of new issues.

On-Market BookBuilds, which has briefed more than 170 listed companies over the past few months, says the new facility will enable companies to access all-of-market demand for issues of new shares while continuing to employ the expertise of investment banks and brokers.

“Companies then have more information to set the parameters that determine how much of the issue they wish to allocate to identified priority bidders (such as shareholders) and how much to on-market bidders, and the effect of these decisions on the pricing of the offer. The defined allocation procedures give investors confidence that they will be treated fairly,” says On-Market BookBuilds managing director Tim Eisenhauer.

He lists the following as the tool’s key benefits:

  • Fairness: pricing and allocation processes are fair to all bidders. All bids at or above the final (and disclosed) bookbuild price participate in a fair allocation process.
  • Transparency: pricing, allocation processes and the minimum on-market allocations are disclosed. Investors see a live price throughout the bookbuild so they know what price they must bid to receive an allocation.
  • Efficiency: companies access demand from all eligible investors.
  • Where contestable pricing and broader distribution reduces the discount, shareholder dilution is minimised.
  • Success-only fee structure for issuers.
  • Improved corporate governance.