WAM Capital bookbuild poses questions for ASX

Equity capital markets bankers and stockbrokers will keep a close eye on WAM Capital’s on-market bookbuild scheduled for Monday, which is seeking to raise about $15 million to fund a dividend redistribution plan. WAM Capital principal Geoff Wilson is the first to try out the on-market bookbuild, marketed as a fairer way to allow brokers and high net worth investors get stock in share issues.

But the on-market bookbuild is also likely to raise some discussion among the ECM establishment. Australia’s ECM bankers and lawyers are proud of their history championing equity raising initiatives such as the accelerated rights issues which helped distressed companies raise equity quickly during the credit crisis.

It’s fair to say much of the ECM establishment has been against on-market bookbuilds through their development. Importantly, they take allocation power away from the issuer and their advisers, and lets the market decide who should get the shares.

In the case of WAM Capital, market watchers may also question whether the raising is material enough under ASX listing rules for WAM Capital’s shares to be taken off the ASX boards.

WAM Capital is expected to enter a trading halt for the bookbuild, worth about $15 million. It means the raising is worth about 2 per cent of WAM Capital’s market capitalisation, which some would argue is not material enough to see a company’s shares suspended. One of the equity market’s most hallowed principles is that shares should be open for trading for investors.

The ASX has an interesting conflict. It has promoted the on-market bookbuild model and receives a fee for the service. But it is also in charge of trading halts.