SPP and rights issues as covered earlier are a strategy for companies to raise additional capital. In light of economic pressures caused by a coronavirus, many companies are in the position of performing SPPs or rights issues. In the book Gateway to Investing, we covered the types of ways companies raise capital. This report will show you how to participate and how they work for investors.
When announcing these types of capital raisings, the company will release booklets via ASX announcements detailing the information of the raising. In these booklets several key pieces of information are included;
• The issue price
• The minimum buy-in
• The record date for entitlement
• Opening and closing date of the raise
• Date of final details
• The total amount to be raised
• Eligibility criteria
• The date of Issue of shares
• The date of trading commencement of shares
The issue price is usually given as the lower price an arbitrary set price or the average price over a set time period. This is to ensure that if the share price drops in the coming days the price of the issue is still attractive for investors. The record date is the date that you must be a registered shareholder to be eligible for the capital raise. It is important to keep in mind the T+2 settlement process, meaning that if you are not already a shareholder you must buy at least 2 days prior to ensure that the trade settles. The opening and closing dates of the raise is the dates that you can apply and pay to receive the shares. This means that when paying your money must be received prior to the close date. The companies usually outline the ways (usually BPAY, or cheque) to make payment and the process of applications forms. Generally, BPAY is the most common form of payment, and for many companies, there is no need to return an application form if paying via BPAY.
If for some reason your money is to be refunded the company will usually direct credit the money back into your account or return your cheque. This may occur if your application is incorrect or you didn’t follow the rules of the SPP correctly. Or if the raise has been scaled back by the company.
A company may scale back the raise if they decide to raise less capital than originally disclosed. In this case, some or all of your SPP may not settle and you will receive a refund for the amount not settled.