Getting a better deal on capital raisings |
Tweet | ![]() |
Christine St Anne: Our Head of Equities, Peter Warnes recently made some comments about retail investors getting unfair access to deals like IPOs. A new service from the ASX aims to change that. Today, I'm joined by Ben Bucknell to tell us a little bit more about the ASX On-Market BookBuilds. Ben, Happy New Year.
Ben Bucknell: Thanks. I can't believe it's 2014 already.
St Anne: Ben, can you tell us a little bit about the AXS On-Market BookBuilds and how it works?
Bucknell: Absolutely. Well, it really came out of the 2008-2009 years where there was a lot of deeply discounted offerings, where normal ordinary shareholders and companies were being dilutive. Companies clearly needed access to capital quickly, so they used the traditional placement method.
The problem with that method was that it didn't tap into every eligible investor in the market. So I took an idea to the ASX which said, why don’t we take the traditional process, all the controls that you have around allocations and around pricing, but put it on the market.
So that every investor has the opportunity to bid for shares if they see value in them and also for companies, meaning that a company can access not just a really small pool of investors, but the entire market of investors. So ASX BookBuild is really a combination of the secondary market as we see it today and the traditional process of raising capital.
St Anne: So how can investors get access of some of these deals, such as IPOs?
Bucknell: Well, it's very simple. All they need to do is fill out a once-off application form with their broker. Once they have done that, it's just like buying shares in the secondary market. So you see a code, let's say, it was BHP doing a – as we were talking about before – doing a BookBuild to rise capital, that's a BHPXPB and they just bid in. But in order to bid in, they have got to fill out that once-off agreement with their broker.
St Anne: Ben, the traditional way for companies to raise capital was to go through their broker. So do you expect more companies to participate in this service?
Bucknell: Well, one point of clarification there. This always does involve a broker. So you still have a broker doing their traditional process of getting together demand from your institutional investors or from your existing shareholders. They bring that demand into the book and then they do the ASX BookBuild after they are comfortable with what their already offer is.
So for companies, it's a no-loss proposition. Basically, they can get access to the entire market of potential shareholders, potential investors, and they do that after they are already securing the knowledge that the capital is going to be raised. They can either do it simultaneously or they can do it consecutively. So for companies, it's a very simple proposition. Do you want to be able to access 30, 40, 50, 100 investors or do you want access to the entire market of investors?
I think what's really interesting and particularly with your clients, you've got 207,000 high net worth clients in Australia with investible assets of more than million dollars. You've got a $155 billion sitting in self-managed super in cash and short-term deposits alone. That's only a third of self-managed super pool by the way. So all that capital can come to bear and – on the market and be used for companies to grow, and at the moment the current prices doesn't let companies tap into those markets.
Of course, on top of that there is all the small institutional managers. So if they get a phone call at the moment, they might be saying, 'Oh, I don't necessarily get a phone call on the good ones, so am I going to take up in this one.' But under ASX BookBuild, every single investor gets to participate and gets to bid and be allocated in the process which is fair. It's transparent because everyone can see a live price and you know, just like you do in the secondary market, that if you bid at or above that price, you'll be dealt with securities in the same way that every other on-market bidder will be dealt.
St Anne: Finally, Ben, being a relatively new service, how has the market responded?
Bucknell: I think it's been fantastic. We launched on the 8th of October, only five days later we had our first transaction, WAM Capital. That was 70% oversubscribed and they upsized the offering from $15 million to $25 million. The next offering LNG, a resources company, that went out, raised $10 million using the facility and now there is lot of IPO where the front end of the process got the demand from ASX BookBuild and that's still open for investors to be able to bid into. That's a call company up in Queensland.
So I think from the companies perspective, there has been an extraordinarily strong response. We've seen around 200 listed companies, most of those are in the ASX 300. The response from them has been unanimously positive. We've seen a number of brokers who are now out in the market pitching this and saying this is a wider wining business. And of course, we've had a ton of brokers and their clients sign-up so that when a BookBuild comes along, they can bid in and be treated in the same way that a big institution might be.
So if you're a small investor out there and you haven't yet signed up for ASX BookBuild, then contact your broker, get that once-off application form and if you're eligible under the law to bid. And by that I mean, if it's a fully documented offer like an IPO, you can just bid in no matter who your broker is, if they are using ASX BookBuild.
If it's an undocumented offer, which is just of course available to sophisticated investors, and you make that category, well, you can bid into that as well and you just see the code just like you do in secondary market trading. So it's really simple. The key is just signing that once-off agreement with your broker and every broker in the market is entitled to bid into ASX BookBuild facility in the same way that they bid for shares in the ordinary trading of secondary market.
St Anne: Ben, thanks so much for your insights.
Bucknell: My pleasure. Thank you.

19/05/2022 Worries about inflation’s toll on earnings sparks Wednesday’s 4% plunge, but stocks are now far undervalued.

11/05/2022 Morningstar analysts have identified TPG telecom as the most undervalued telecom stocks in the ASX 200 detailing multiple catalysts for earnings recovery and growth.

28/03/2022 Where are entertainment and streaming services headed?

15/03/2022 Knowledge of the local market, strong branding and a growing subscription service should see the undervalued retailer retain market share in the rapidly growing online sales category, says Roy Van Keulen.

13/02/2022 Morningstar equity analyst Shaun Ler explains why he see valuation upside high for MFG even as shares lose steam.

29/11/2021 These companies are set to profit from the move to clean energy, says Lazard.

08/11/2021 Morningstar thinks these moaty companies will remain resilient in the face of inflation and ongoing supply chain challenges.

01/10/2021 And how G8 Education and Link Administration are positioned for long-term success.

30/09/2021 What Reporting Season August 2021 told investors about the health of the financials sector.

20/09/2021 Analysts expect the sector to recover to pre-Covid trading levels once borders reopen.

15/09/2021 Rising customer deposits and access to cheap funding helped Australia's banks stave off net interest margin pressure, but analysts see warning signs.

10/09/2021 Hydrocarbons poised for a comeback.

09/09/2021 Providers have lifted prices after years of a debilitating chase for subscribers at all costs , says Morningstar's Brian Han.

07/09/2021 Morningstar senior analyst Grant Slade says Brambles secular growth trend is intact despite nearterm headwinds. He discusses results from the building and construction materials sector.

11/08/2021 Higher wholesale electricity prices bode well for AGL, according to Morningstar senior equities analyst Adrian Atkins.

10/08/2021 Copper and iron ore have benefited materially from China’s stimulus and the developed world recovery. But Morningstar analyst Mat Hodge see these benefit as transitory.

05/08/2021 We believe the transaction has a high chance of succeeding.

03/08/2021 The industry still has significant growth potential.

03/08/2021 Is one of the biggest sponsors of the Olympics positioned for an all-electric future?

08/07/2021 Private equity is an exciting area for investors, with lots of hotly-tipped stocks. But there are risks to be aware of, says Pitchbook analyst Dylan Cox.

06/07/2021 Australia's largest banks have excess capital because they cut dividends, were more conservative on lending, divested assets and raised equity last year. Morningstar's Nathan Zaia thinks most of it should be returned to shareholders.

02/07/2021 PEXA burst onto the ASX this week in the biggest float since 2019. Morningstar's Gareth James gives his take on the company's future growth prospects.

30/06/2021 Iron ore prices have been on a tear, boosting the profits of Australia's top miners. How did we get here and is the only way up? Lex Hall sits down with Morningstar's Mat Hodge.

24/06/2021 Meeting the deluge of demand is the biggest task for US companies, says Bell Asset Management's Ned Bell.

21/06/2021 Morningstar's director of Asia equity research is confident the e-commerce giant will bounce back.

18/06/2021 A wide moat and attractive dividend potential are among the key takeaways of Woolworth's decision to demerge from the liquor and hospitality group.

10/06/2021 Callum Burns of ICE Investors explains his conviction in pharmaceutical distributor Ebos, PSC Insurance Group, and elite sports analytics provider Catapult.

09/06/2021 Callum Burns explains how ICE Investors identifies companies with original products and sticky customer bases.

08/06/2021 They’re building an empire.

07/06/2021 A year ago the oil price went negative. How have oil giants handled the past 12 months and what's the outlook from here? Morningstar analyst Allen Good explains.

03/06/2021 The airline sector is set to recover as international travel resumes. Morningstar analysts think Wizz Air offer the best opportunity among low-cost carriers.

28/05/2021 4D Infrastructure's Sarah Shaw outlines the investment case for Spanish multinationals Cellnex, and Iberdrola, and the potential of Mexican airports.

27/05/2021 We’re raising our fair value as sales hit new highs—but investors need to put it in perspective, says Andrew Willis.

25/05/2021 Covid-19 has enhanced rather than impeded the future for global infrastructure, says Sarah Shaw of 4D Infrastructure.

24/05/2021 Tribeca's Jun Bei Liu also explains why she sees opportunity in sleep apnea specialist ResMed as well as Treasury Wine Estates.

19/05/2021 American Century Investment's Patricia Ribeiro sees growth in Chinese battery technology, biologics, and building materials in Latin America.

18/05/2021 Robotics is a fast-growing area of tech, creating opportunities in medical, logistics and life sciences sectors and much more.

18/05/2021 Square's Bitcoin purchase is more marketing than operations

10/05/2021 If Elon Musk ends up delivering, we might need to raise our fair value to US$1500 a share.

07/05/2021 Banks and resources are poised to deliver dividends, and Treasury Wine Estates and BNPL are worth a look, says Jun Bei Liu of Tribeca's Alpha Plus long/short fund.

05/05/2021 Digital banking, ecommerce and 5G are among the key trends set for rapid growth, says Patricia Ribeiro of American Century Investments.

23/04/2021 EARTH DAY 2021: Why should investors care about deforestation and how can it can be taken into account within an investment portfolio?

16/04/2021 Amazon.com and ServiceNow are looking increasingly attractive.

15/04/2021 Investment tips from Australian equities fund manager Kate Howitt.

12/04/2021 But the sector's current tailwinds are likely unsustainable, so investors should prioritise high-quality businesses with stable balance sheets, says Morningstar's Dave Meats.

08/04/2021 Kate Howitt oversees Fidelity’s Australian Opportunities fund. She discusses her investing approach, the outlook and where she sees value.

06/04/2021 Remember that the returns on speculative assets like Bitcoin are high risk

01/04/2021 Steve Johnson explains why Forager Funds Management has bought and held Enero, SG Fleet and Zebra Technologies and why they're poised for further growth.

30/03/2021 Forager's Steve Johnson explains why he's bullish on consumer spending, enterprise software companies, and why he has cashed in on big names like Uber.

29/03/2021 Kristiaan Rehder explains why the West Australian biotech is among the top performers in the Bennelong Kardinia Capital Absolute Return Fund.

24/03/2021 An absolute return fund aims to seek returns in all weather. Kristiaan Rehder from Bennelong Kardinia Capital explains how.

23/03/2021 Diversified portfolios, strong balance sheets and healthy payouts. Grant Berry singles out three big contributors to the SG Hiscock Property Income Fund.

22/03/2021 SG Hiscock's Grant Berry explains how real estate was affected by the pandemic, how property stocks coped, and the chase for income in an evolving retail landscape.

19/03/2021 Video gaming has soared under lockdown, can this sector keep growing post-covid? Morningstar analyst Neil Macker takes a look.

18/03/2021 The retail giant's strong balance sheet will help it navigate the shift to online shopping and capitalise on the return to normal life, says Morningstar's Johannes Faul.

10/03/2021 Ahead of Deliveroo's IPO, Morningstar analyst Ioannis Pontikis looks at the outlook for the business, its valuation and concerns about gig workers.

08/03/2021 E-learning has become the norm for young students and university-goers across the world. Morningstar analyst Michael Field looks at whether the trend is here to stay.

04/03/2021 Special guest Peter Warnes, our head of equities research, joins the Morningstar Foundations of Investing Webinar series to give his unique take on February Reporting Season and answer subscriber questions.

01/03/2021 Morningstar's Nathan Zaia on the outlook for the banks, dividend payouts and the move by the Bank of Queensland to acquire ME Bank.

25/02/2021 The biggest takeaway from that period is not to panic when the market tumbles.

19/02/2021 Morningstar's Brian Han weighs up News Corp's deal with Google and examines the effect of Facebook's decision to block content from Australian media outlets.

18/02/2021 Quay Global Investors' Chris Bedingfield explains how self-storage, data centres and industrial property can offer diversification and growth.

16/02/2021 Uniti Group and Nextdc are among the companies that SG Hiscock's Hamish Tadgell says have flourished during the pandemic.

15/02/2021 Hamish Tadgell of SG Hiscock explains the portfolio changes he’s made in a bid to capitalise on the shift.

05/02/2021 The battle between the Reddit army and hedge funds is nothing new—the question is will regulators be willing to step in, says Morningstar's John Rekenthaler.

03/02/2021 Competition is fierce for fast fashion retailers such as Asos, H&M, Zalando and Inditex. Morningstar analyst Jelena Sokolova takes a look at the sector.

28/01/2021 Retirees require stocks' growth potential, but they need a cash and bond buffer, too.

27/01/2021 Rebecca Jiang, manager of the JPMorgan China Growth & Income Trust, looks at why Chinese stocks soared in 2020 and whether the trend can continue.

21/01/2021 Redpoint CEO and portfolio manager Max Cappetta looks at the dividend potential of large-cap names, the resilience of Qantas, and the local tech landscape.

19/01/2021 Stocks still look cheap across all subsectors, especially oilfield services and refining, says Morningstar analyst Dave Meats.

19/01/2021 What are the rewards and risks of using this technology?

15/01/2021 Morningstar's head of policy research Aron Szapiro explains what sort of changes a Biden government will make and how they will affect company valuations.

14/01/2021 Freight-rail, building temperature efficiency, and carmaking are among the sectors Aviva Investors' Jaime Ramos Martin has his eye on.

13/01/2021 Dividend investors had a hard time in 2020, but Morningstar analyst Dan Lefkovitz think the outlook is brighter for the year ahead.

06/01/2021 Morningstar equity analyst Allen Good looks at the prospects for oil and gas giants in the year ahead.

05/01/2021 China had a strong year after a rocky start, but can it continue—and what does a US President Biden mean for the region? Morningstar analyst Lorraine Tan explains.

04/01/2021 Morningstar equity director Alex Morozov considers the outlook for tech, travel and beyond for the year ahead.

25/12/2020 2020: we look back at the highs and lows of an unprecedented year in financial markets and explore the themes shaping 2021.

22/12/2020 Music streaming companies have seen stellar growth in user numbers. We ask Morningstar equity analyst Neil Macker if the trend can continue.

18/12/2020 Will there be opportunities to deploy cash in the new year? Will there be a reprieve from covid? And what will the incoming Biden administration mean for markets?

14/12/2020 Learn what we look for when rating a company.

14/12/2020 Morningstar's new approach unpacks the environmental, social and governance risks that companies face.

10/12/2020 Industrial companies typically generate better cash flows and can offer a steady income stream, says the IML founder.

09/12/2020 The lofty valuations of Tesla and Afterpay typify the effervescence and speculation in the market, says the IML founder.

08/12/2020 Car makers may not be an obvious investment choice for ESG-conscious investors, but Morningstar analyst Tancrede Fulop says some of the largest companies score highly in some measures such as safety and human capital.

07/12/2020 Janus Henderson's Matt Peron considers how the relationship between the US and China will evolve under a President Biden.

04/12/2020 Treasury Wine Estates remains an undervalued stock in spite of China's demand-destroying tariff on Australian wine. Morningstar director of equity research Adam Fleck explains why.

03/12/2020 And do any other assets currently compare?

01/12/2020 Beaten-down travel stocks and BNPL providers featured heavily, says nabtrade’s Gemma Dale.

30/11/2020 Many people were waiting for the opportunity to buy shares at historic discounts, says nabtrade’s Gemma Dale.

27/11/2020 The 171-year-old wealth manager has had its scandals but there's merit to its turnaround strategy and the quality of its other assets, says Morningstar's Shaun Ler.

27/11/2020 BNPL products such as Zip Co help boost consumer spending but they come with risks and are overvalued, says Morningstar analyst Shaun Ler.

26/11/2020 The Magellan co-founder argues the ecommerce acceleration is here to stay and ponders the effect it will have on other sectors such as travel and commercial real estate.

25/11/2020 Greg Dean of Cambridge Global Asset Management explains why the consumer services sector has yielded healthy returns.

23/11/2020 Their shares have gotten hammered this year. Are they opportunities or value traps?

12/11/2020 We're not out of the woods yet, says our head of equity research, as he looks for safety in businesses we can't live without and shies away from the banks.

10/11/2020 What happens when you buy something when your bank card? Morningstar analyst Niklas Kammer explains which companies are benefiting from your transaction.

09/11/2020 With travel bans and economic lockdowns, the luxury sector has been hit hard in 2020. But there are still opportunities, says Morningstar analyst Jelena Sokolova.

05/11/2020 A discussion of taxes, stimulus, regulation, and the likely market reaction as results from the 2020 poll come in.

03/11/2020 Why you should resist the urge to make predictions when there's a disconnect between the economy and security prices.