The Australian Securities Exchange (ASX) has launched a new bookbuilding facility which it says will broaden the number and range of investors who can participate in this process to set the price of new shares.
In a bookbuild, the bookrunner, usually an investment bank, determines the price of shares to be offered based on the number of shares demanded by institutional investors and the price they are willing to pay for those shares.
Currently, participation in bookbuilds is via invitation and is limited to selected investors, usually major shareholders.
Under the ASX BookBuild facility, a wider market of potential buyers is available.
All investors could gain access if the offer of shares is a documented offer as determined by the Corporations Act.
But if the offer is undocumented, such as a placement of shares, only sophisticated investors can participate.
On-Market Bookbuilds (OMB) developed the ASX Bookbuild software.
"From today, ASX BookBuild is available to raise capital in a transparent, fair, efficient, and cost-effective way, drawing on the maximum number of potential investors in the marketplace," OMB chief executive Ben Bucknell said in a statement.
"Institutional investors benefit by having access to all capital raisings, and by seeing a live price.
"All investors, from retail to the largest institutional buyers, benefit by increased access and a level playing field."
Companies would benefit by accessing demand from all potential investors, lowering the cost of raising equity and have various means to control the price and allocation of shares.