What You Need to Know About Capital Raisings on the ASX

Read on to learn how companies listed on the Australian Securities Exchange can raise cash, from private placements to rights issues.

There are different reasons why a company might be looking to increase its capital, from acquiring new assets to keeping a healthy balance sheet and everything in between.

It’s important for both new and seasoned investors to be familiar with the different options that companies have to raise money and how different methods can impact a company’s share price.

In uncertain times, companies from all sectors and exchanges face challenges in developing their assets, but how can companies listed on the Australian Securities Exchange (ASX) raise cash? The Investing News Network reached out to experts to answer your questions about capital raising on the ASX.

Understanding capital raisings on the ASX

Placements are the most common way for companies to raise capital, but there are plenty of other alternatives. In fact, on the ASX there are quite a few different avenues a company can take to raise capital and push forward with its plans. Here’s a brief overview of the main options a company has:

  • Initial public offerings (IPOs): IPOs happen when a private company decides to list on a public exchange, allowing it to raise capital from public investors. To undertake an IPO, the company needs to meet certain criteria.
  • Placements: A placement is an allotment of shares made directly from a company to investors in order to raise equity capital.
  • Share purchase plans: A share purchase plan allows eligible current shareholders to buy a capped amount of shares in a company’s capital raising at a predetermined price.
  • Rights issues: Rights issues or entitlement offers let existing shareholders buy more shares. In a renounceable rights issue, shareholders can trade or sell their “entitlement” or “right” to buy shares in the capital raising to other investors, while in a non-renounceable they don’t have that option.
  • Underwritten offerings: An underwritten offer happens when a party, such as an investment bank, agrees for a fee to buy any unsold shares in an equity capital-raising offer.
  • Options: Options give shareholders the right to buy more shares within a specific timeframe.

In 2020, the ASX introduced temporary measures to facilitate emergency capital raisings to help companies weather the COVID-19 storm. The move increased the placement capacity for listed companies from 15 percent to 25 percent of their share capital, as long as they met other requirements.

What to consider when a company is racing for cash

As 2021 kicks off, and with uncertainty still on the horizon, many companies will continue to look for ways to increase their capital. But what should investors consider when companies are racing for cash?

Antony Rumboll of Baker Mckenzie said Australian investors are receptive to companies raising equity capital and do not necessarily immediately see it as a negative.

“ASX companies raising capital for growth initiatives are generally supported if the market supports that initiative,” the Baker Mckenzie partner in Sydney said. “Equally, equity raisings to shore up balance sheets are generally supported, but will require a greater discount.”

Speaking about the impact of a capital raising on a company’s share price, Timothy Toner, managing director and founder at Vesparum Capital, said this is typically driven by the underlying rationale of the transaction and the deal parameters.

“Investors should be concerned if the capital raising is completed for sub-optimal reasons at an excessively high discount to the prevailing share price,” he added.

For Toner, capital raisings can be enormously dilutive to existing shareholders, so a compelling use of funds is critical to see from companies. “Lower discounts and fairer offer structures like entitlement offers are also positive for shareholders,” he said.

Commenting on the impact of raising cash, Rumboll said rights issues are generally priced at a discount to the theoretical ex-rights price and so can cause a share price drop once the rights issue is complete.

“That said, if the capital raising accompanies an accretive transaction, the price can quickly appreciate above the offer price,” Rumboll said. “Where a raising is designed to shore up balance sheets, the discount is often higher, potentially quite significant. So investors closely scrutinise the offer price and applicable discount as well as the use of proceeds.”

Can retail investors benefit from capital raisings?

The debate as to whether the way ASX companies raise capital favours institutional investors over retail investors has been ongoing for several years.

“Investors generally can benefit significantly from participating in discounted capital raisings,” Toner said. “However, institutional investors definitely receive the lion’s share of allocations, and therefore returns, as compared to retail investors. Clearly it’s not a level playing field.”

For his part, Rumboll said the boards of listed companies are sensitive to ensuring that capital raisings are equitable.

As such, he explained, rights issues, which can include or exclude a renounceable “right,” are a popular means for companies to raise capital to ensure that equitable approach. Or, where an institutional placing is employed, retail investors are usually provided an opportunity through a “share purchase plan” to maintain their investment in the company.

“During 2020, there was a significant emphasis on allocations of capital raisings, with an expectation from the market, and regulators, that existing investors would be given a pro rata allocation ahead of new investors,” Rumboll added.

Don’t forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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Gold isn't all that glitters in the land down under — silver in Australia is a major industry, and the country is home to both large and small players.

When it comes to precious metals, Australia has long punched above its weight — the nation was born riding the wave of a gold rush.

Gold isn't all that glitters through — Australia is also a major global producer of silver. It's among the 10 top producers, and was ranked seventh in 2020, with 1,300 tonnes coming from the many operational mines in the country. By comparison, the world's top producer, Mexico, produced 6,300 tonnes that same year.

Other key players in the silver market are Peru, China and Russia, which produce more silver than Australia, and the US, Argentina and Bolivia, which produce less.


Australia is sitting on quite a lot of the precious metal, with the world's second largest reserves, behind only Peru.

According to Geoscience Australia, one of the country's first mines was a silver-lead mine near Adelaide. Since then, the entire continent has been combed over with a fine-toothed comb, with deposits identified in every state and territory and active mines in every jurisdiction but one (Victoria).

Overall, Australia is well explored when it comes to silver, and since the mid-1800s it's had a constant stream of silver production. Aside from that, the country boasts metals-processing facilities in South Australia that separate the precious metal from its commonly mined counterpart metals, lead and zinc.

Silver companies in Australia

Those looking at the Australian silver market have options. There are plenty of big players with interests in Australian silver, and many smaller players for investors to consider researching too.

Most silver comes from mines dedicated to other metals — Glencore's (LSE:GLEN,OTC Pink:GLCNF) Mount Isa in Queensland produces mainly copper, zinc and lead, but silver is separated by the company's integrated processing streams. Glencore also operates the McArthur mine in the Northern Territory, which is primarily zinc, but between its copper and zinc assets, Glencore produced 7,404,000 ounces of silver in Australia in 2020 — over 200 tonnes.

Elsewhere, BHP (ASX:BHP,NYSE:BHP,LSE:BLT) produces a lot of silver as well at the Olympic Dam operation in South Australia. Perhaps best known for the production of uranium and copper, it also yields significant silver resources to the tune of 984,000 ounces in 2020 (or almost 28 tonnes).

According to Geoscience Australia data from 2016, over 20 mines in Australia produced silver in that year, while there are dozens of other resources identified in each state.

A primary producer of silver is the Cannington mine in Queensland, where South32 (ASX:S32,OTC Pink:SHTLF), a company that was spun off from BHP in 2015, mines silver and lead. Cannington is a big one, producing 11,792,000 ounces in 2020, or 334 tonnes of silver.

Tasmania boasts the Rosebery mine, which has seen 85 years of continuous operations and is currently owned by MMG (ASX:MMG,HKEX:1208). Rosebery, like all the others here, is polymetallic, and besides silver also produces copper, zinc, lead and gold. MMG also has the Dugald River mine in Queensland which also produced silver.

Getting into smaller companies, there are those like New Century Resources (ASX:NCZ) which restarted the Century mine in the Northern Territory for zinc and silver.

The future of silver in Australia

So, you get the picture — there's a lot of silver to be mined in Australia by way of mining everything else.

It's worth noting that because silver operates both as a precious and an industrial metal, and is mined most often alongside base metals, it can be pulled in many directions. However, it traditionally follows (and lags behind) its precious metal sibling, gold, making it a valuable investment commodity to keep an eye on.

Looking forward, the future of the commodity in the land down under — especially given Australia's significant reserves and operator diversity — is as bright as you'd like it, and depends on what investors are most interested in, given the by-product nature of the metal.

Don't forget to follow us @INN_Australia for real-time updates!

Securities Disclosure: I, Scott Tibballs, hold no direct investment interest in any company mentioned in this article.

Australia took a stand against Facebook and Google earlier this year, and the move could have long-term implications for tech investors.

It was a ban that sent Australians wild and had the whole world watching.

Back in February, Facebook (NASDAQ:FB) stopped users in Australia from posting news in a week-long blackout, reacting to proposed legislation that would have forced the social media behemoth to pay publishers for content.

What prompted Facebook to "friend" Australia again, and what are the potential long-term implications of the squabble? Read on to learn what tech-focused investors in Australia should know about the situation.


Australia squares off against Facebook

On February 25 of this year, Australia's federal government passed the News Media and Digital Platforms Mandatory Bargaining Code. It was developed after extensive analysis by the Australian Competition and Consumer Commission, and is aimed at ensuring that news media businesses are fairly remunerated for their content.

It stipulates that digital platforms such as Facebook and Google (both named in the documentation) must pay news outlets whose content they feature — for example, if content is shared on Facebook or shows up in Google search results. The idea is that this will help to sustain journalism in Australia.

Unsurprisingly, Facebook and Google didn't react well to the code, which was first introduced in 2020.

Google didn't make any moves after it passed, but Facebook quickly made it impossible for Australian users to share news content, and pages for both local and international news organisations went blank — a major concern given the COVID-19 and wildfire concerns that were circulating at the time.

Australian Prime Minister Scott Morrison was scathing about Facebook's decision — which he ironically shared in a Facebook post — declaring the tech giant's actions "as arrogant as they were disappointing." He added, "These actions will only confirm the concerns that an increasing number of countries are expressing about the behaviour of BigTech companies who think they are bigger than governments and that the rules should not apply to them."

Despite strong feelings from both Australia and Facebook, the dispute was resolved fairly quickly, with the country agreeing to make four amendments to the legislation and Facebook restoring Australian's access to news.

Implications for Big Tech and news organisations

Both Australia and Facebook have claimed victory in the dispute, with a Facebook representative saying the company will be able to decide if news appears on the platform — meaning it won't automatically have to negotiate with any news businesses. Changes were also made to the arbitration process.

Tech experts have pointed out that larger news companies may ultimately benefit from the changes, but smaller ones could be pushed to the side. Major publishers that have struck agreements with tech giants, such as News Corp, Nine Entertainment (ASX:NEC,OTC Pink:NNMTF), Seven West Media (ASX:SWM) and Guardian Australia, may be able to increase their market share while smaller independent players lose out.

A business that is in full support of the laws is Microsoft (NASDAQ:MSFT). During the conflict, President Brad Smith came out loudly in favour of Australia's law, and advised that his company is willing to step up with search engine Bing should Google and/or Facebook pull out of the Australian market.

"In Australia, Prime Minister Scott Morrison has pushed forward with legislation two years in the making to redress the competitive imbalance between the tech sector and an independent press. The ideas are straightforward. Dominant tech properties like Facebook and Google will need to invest in transparency, including by explaining how they display news content," he said in a blog post.

"The United States should not object to a creative Australian proposal that strengthens democracy by requiring tech companies to support a free press. It should copy it instead."

Global reach and tech investor impact

Six months down the road from Australia's landmark legislation, it's tough to say what the long-term impact may be.

That said, market watchers do believe the country is part of a new precedent of forcing Big Tech into paying for journalism — something giants Facebook and Google are not used to.

Countries looking to pursue similar legislation include Canada, where Facebook agreed in May to pay 14 publishers to link to their articles on its COVID-19 and climate science pages, as well as other unspecified use cases. Canada is pursuing other avenues too. Meanwhile, in France, Google said it will pay publishers for news content after the country took up new EU copyright laws that make digital platforms liable for infringements.

For investors, the takeaway is perhaps that while companies like Facebook and Google may seem too big too fail, they too can fall subject to new regulations that can change how they do business. As nations around the world look to take back control from these mega companies, it's important to be aware of possible effects on their bottom lines.

Don't forget to follow @INN_Australia for real-time updates!

Securities Disclosure: I, Ronelle Richards, hold no direct investment interest in any company mentioned in this article.

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