When ASX (ASX: ASX) resumed trading on Friday, it fell 6.1%. That came on top of a 2.3% decline the day before the trading halt to announce its accelerated renounceable rights issue.
After trading as low as $32.51, shares in the Australian stock exchange operator finished the day down $2.13 at $33.15. With the US market Friday retracing almost half its previous day’s gain and our market a bit baffled by the ASX’s move, the price could well drop further.
Investors had to be registered owners of stock at 7 p.m. Sydney time Friday to be eligible for the issue. Given settlement delays, that precluded anyone buying on Friday from being on the books in time to take advantage of the $30 issue price, which represented a more than 16% discount on the prevous close. Offer documents go out Thursday, acceptances close July 5 and entitlements are market-tradeable in the meantime.
ASX shares closed at $39.38 just five weeks ago, have a year-high of $40 and before resuming trading on Friday were still up 14.83% on the year to date. The amount holders will be able to trade their rights for might not make up the difference between the current price and what it closed at before the announcement, let alone those recent highs.
Institutions took up 96% of their entitlments and rights not taken up by eligible shareholders were sold at $3.70. A high number of retail investors could be expected to take up the offer too.
The unexpected $553 million underwritten rights offer equals about 10% of the company’s value. It is expected to be used to retire debt and to meet the expected increased costs of new capital standards for international clearing.
The surprise rights issue isn’t a windfall for retail shareholders, but it’s how ASX uses its fattened balance sheet that will hopefully reward investors in the longer term.
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Motley Fool contributor Andrew Ballard does not own shares in ASX.