The securities market in Australia, like many other global stock markets, has experienced high levels of volatility and general uncertainty in light of the economic disruptions caused by COVID-19. Given the unprecedented nature of the coronavirus pandemic and its impact on global economies, it is difficult to predict with any certainty how long COVID-19 will continue to affect financial markets.
This provides challenges for many listed companies that need to raise equity capital in the short to medium term, particularly those that require funding on an urgent basis in order to meet upcoming debt or other contractual commitments or to simply satisfy ongoing working capital requirements.
The impacts of an uncertain market on the capital raising initiatives of listed companies include:
- Depressed share prices
- Limited access to professional underwriting
This guide, Australia Beyond COVID-19: Mitigating the Control Effects of Entitlement Offers During a Time of Uncertainty, provides a summary of the relevant regulatory framework and key rights issue exceptions. It also gives an overview of the considerations that listed companies and their directors should consider when structuring a rights issue (particularly one that is underwritten) to mitigate potential control effects.