2023 secondary raisings by the numbers

Given the expanded scope of this year’s Australian ECM Review, we are pleased to introduce a new section – 2023: Secondary raisings by the numbers. In this section, we comment on some of the key trends and observations relating to secondary raisings by ASX-listed issuers in the past year, focusing on rights issues, placements and share purchase plans (SPPs) that raised at least $50 million. In our 2023 data set, approximately $13.3 billion in aggregate was raised. 

Offer structure

In 2023, the combined placement and SPP was the most popular offer structure (42%), followed by the combined placement and rights issue (22%). This was not surprising given both placements and accelerated rights issues allow issuers to raise a significant portion of the desired capital upfront (in the case of a placement, subject to the issuer’s available placement capacity, which can then be supplemented by a rights issue or SPP). As such, these structures are often attractive to issuers seeking to raise capital quickly, and have the benefit of minimising the time institutional investors take market risk (which likely contributes to a tighter discount – see our comments on ‘Offer pricing’ below). Coupling a placement and rights issue, or a placement and SPP, also enables retail shareholders to participate and, at least in part, addresses fairness issues faced by standalone placements. 

Offer size 

The majority of secondary raisings in 2023 that we surveyed had an offer size of between $50 million and $500 million, with only one secondary raising exceeding $1 billion (Orora’s $1.35 billion placement and ANREO).

Breakdown by offer size 2023
 

Offer pricing

In theory, placements tend to have tighter discounts than rights issues (given their relative speed and the broad range of investors that can be targeted in a placement – ie generally companies would target both existing institutional shareholders and new institutional investors, resulting in theoretically greater competition, all else being equal), and non-renounceable rights issues tend to have tighter discounts than renounceable rights issues (given the non-renounceable structure incentivises participation through loss of value for those who do not participate).

In the data for 2023, the combined placement and ANREO structure had an average discount to last closing price of 18.80%,¹  while the combined placement and SPP structure had an average discount to last closing price of 12.41%, which was similar to standalone placements (12.83%). By comparison, the average discount to last closing for all secondary raisings surveyed was 14.19%. 
 

Discount by offer type 2023
 

When comparing offer pricing relative to offer size, we did not observe any particular correlations, with the range of discounts generally falling between 4% and 20% to the last closing price and between 5% and 15% to the theoretical ex-rights price (TERP) for rights issues.

Discount to last closing price: Infratil's placement and SPP was conducted in NZD. For the purposes of our analysis, we have converted the NZD offer price to AUD at the prevailing exchange rate published by the RBA on 6 June 2023, being the date of announcement of that transaction (AUD1=NZD1.10).

In contrast, secondary raisings involving a combined placement and rights issue were all fully underwritten.

In our data set for 2023, we did not notice any particular correlation between raise size and number of lead managers / underwriters on the transaction.

Number of lead managers/underwriters per transaction relative to offer size 2023
 

For 2023, we observed a relationship between offer size and the fees paid to lead managers and underwriters, which is usually disclosed as a percentage of offer size. Smaller secondary raisings tended to attract a higher percentage fee for lead managers and underwriters (which may be up to around 5%), while lead managers and underwriters on average accepted a lower percentage fee for larger secondary raisings (around 2-3%). We expect that the lower percentage fees on larger deals reflect the stronger negotiating position of issuers undertaking larger secondary raisings and the fact that the absolute dollar value of the fee still provides sufficient compensation for the lead managers and underwriters. Having said this, we were surprised at the variability of percentage fees across similar offer sizes (we expected a greater inverse correlation between deal size and fee size). 

Lead manager/underwriter fees relative to offer size 2023
 

Sector spotlights

Almost half of the secondary raisings in our data for 2023 were undertaken by mining companies (41%), followed by consumer services companies, energy companies and software and services companies (each 7%). The remaining secondary raisings were then scattered across a broad range of sectors, with no particular standouts. 

Secondary raisings by sector 2023