Australia Exchange Relaxes Rules for Emergency Capital Raising

(Bloomberg) --

Australia’s stock exchange is relaxing its rules to allow companies in desperate need of cash to raise capital and navigate the quickly shifting operating environment and urging others to review guidance in light of the coronavirus.

The new guidelines give larger companies leeway to raise up to 25% of its market cap in new equity with select investors as long as there is a follow-on offer for smaller investors and mom-and-pop shareholders, at the same or cheaper price, according to compliance guidelines published Tuesday. The one-for-one share issue cap on entitlement offers will also be waived.

The exchange urged companies to update earnings guidance if it was no longer current, or “perhaps more sensibly for most entities in the current highly uncertain climate, to simply withdraw it.”

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The relaxation of rules comes as Australia’s regulators anticipate public companies facing the novel coronavirus crisis will race to refill fast-dwindling cash reserves. Webjet Ltd.’s shares are suspended as it works on a capital raise while analysts expect Flight Centre Travel Group Ltd. to begin tapping investors.

Australia’s securities regulator earlier Tuesday relaxed its rules to allow stocks that have been suspended for up to a total of 10 days in the past year to undertake so-called low-document capital raises to get cash quickly. Without this change, companies that had been suspended for more than five days would have had to lodge a prospectus, delaying much needed cash.

“We want to give companies more fund-raising flexibility in these circumstances,” John Price, commissioner at the Australian Securities and Investments Commission said. “Many will need to seek a trading suspension to understand how COVID-19 will affect them and to put a capital raising in place.”

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