Good news shareholders! Aussie regulators are now letting you buy more shares each year
Link copied to
We have good news for shareholders – you can now buy more shares thanks to ASIC increasing the limit it places on share purchase plans (SPP).
An SPP is an offer of new shares to existing shareholders in a company, and follows a placement to outside investors.
Currently shareholders are limited to buying $15,000 per year in SPPs. A shareholder could not buy any more than that no matter how many were run in a year.
This is different from rights issues where each shareholder’s limit is decided on how many shares they have.
But this limit will now be doubled to $30,000.
“We consider that the increase in the purchase plan limit will help ‘mum and dad’ investors participate in discounted fundraisings, and further supports the efficient functioning of capital markets,” ASIC Commissioner John Price said.
Among other changes, issuers of securities may incur less red tape if certain conditions are met. The guideline says an ASX-listed company does not have to comply with the full disclosure requirements.
Companies offering SPPs will only have to comply with two Corporations Act sections. First, section 736 which prohibits hawking, and section 738. The latter was added into the Corporations Act by the former Turnbull government and facilitated crowd funding.
A desk note out of Bridge Street Capital said the changes would be positive for the industry.
“The attractiveness of an entitlement or rights offering will be significantly diminished relative to a placement with an associated SPP,” the broker said.
“This is because the upgraded $30,000 limit is likely to satisfy the demand of all or the vast majority of retail shareholders for an individual transaction.
“Therefore, we expect to see fewer entitlement offerings relative to the combined placement and SPP structure.”
Bridge Street said that for smaller transactions, a larger underwritten SPP would be a more attractive alternative for the entire transaction (i.e. no associated placement).
“We are already seeing more sole-underwritten SPP transactions at the smaller end of the market and the increased investor participation limit is expected to accelerate this trend.”