Last updated 2 years ago
Why do I need to provide supporting information when I bid?
Everything you need to know about why Fresh might ask for supporting information on certain offers.
For some offers Fresh might ask investors to provide additional information to support their bid.
Why does Fresh ask for supporting information?
Fresh requests supporting information on offers where the company and/or broker has specifically asked for additional details on each bid in order to inform their allocation decision.
Final allocation decisions are made by the board of the issuing company. In most cases the board will request additional information on each participating investor so they can manage oversubscriptions and ensure that the most aligned investors are prioritised.
What information will be collected?
In situations where companies have requested supporting information from participating investors, the following will be collected:
Existing Shareholder Status: Companies like to ensure that their existing shareholders feel recognised, whether or not an investor is an existing holder will often factor into allocation decisions.
Investment Horizon: This refers to how long the investor is intending to hold their placement shares.
Investment Thesis: This is the ‘why’ behind an investor’s decision to make an investment. Companies like to understand the motivations of potential new shareholders. Some things investors could be attracted to include:
The strategy of the company: Investors could be attracted to the company’s plans for growth or realisation of new value.
The activities the company is raising for: Investors could be interested in getting exposure to the potential upside from the work being done on assets/projects held by the company.
The management of the company: Investors could be attracted to the expertise and history of the leaders of the company.
The commodity/sector of the company: Investors might have a particular interest in the commodity the company holds or the sector the company is operating in and wish to gain exposure by investing.
How do companies use this information?
Existing Shareholder Status
Companies like to know if investors are existing shareholders to ensure that they feel recognised when it comes to allocation. Although alternative capital raise structures like Entitlement Offers and Share Purchase Plans are only available for existing shareholders, Placements remain the most popular structure that Australian companies use to raise capital.
As placements are open to all sophisticated and professional investors, in the event of over-subscriptions, companies may look to prioritise existing shareholders when creating their allocation policy.
The investment timeframe of investors is a valued source of information for companies raising capital as it provides insight on the actions of their shareholders post capital raise.
Where shareholders are in terms of their investment timeframe has a significant impact on the stock price through changes in supply & demand, trading liquidity and volatility. This is due to the variety of shareholder activity that occurs post capital raise which companies try to monitor to better understand their investors and price impact, and tailor their allocation policies accordingly.
Longer Investment Horizon
Shareholders who plan on holding stock for an extended period of time typically carry a long term outlook for the company. As this investor demographic doesn't usually take any action immediately post raise, there are implications not only on the immediate market, but also on how companies secure funding in the future. Market Implications
Lower trading activity
Reduced price volatility
Shareholders who hold stock longer term also classify as an existing shareholder if they hold their stock into a new capital raise, which will allow participation in alternative raise structures like Share Purchase Plans, and Entitlement Offers.
Shorter Investment Horizon
Shareholders who plan on holding stock for shorter periods of time trade more frequently and affect the price of the stock more heavily in the short term. As this investor demographic takes action earlier post raise, there are significant implications for the immediate post-raise performance of the company.
Higher trading activity
Increased price volatility
Higher trading volumes in turn provide greater liquidity for companies and investors alike, and this makes trading more attractive as traders are able to more easily open positions with lower spreads. Higher liquidity is typically less risky for investors who want the flexibility of closing positions quickly if necessary.
Companies may also request to get an insight into the 'why' behind an investors decision to make an investment. Understanding the motivation of potential new shareholders is something that companies are more active with, especially with the proven success of quality shareholder engagement and its flow on effect on capital raising.
This in turn informs company decision making on using alternate raise structures to proactively engage with and ensure that their shareholder base can participate and benefit from. An excellent example of this was the recent Race Oncology Share Purchase Plan which saw a heavily oversubscribed capital raise with high levels of shareholder engagement.
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