Share purchase plans: the ASX retail follow-on to a placement

A share purchase plan is an offer by an ASX-listed entity to every registered holder of a quoted class to subscribe for new shares at a discount, capped at $30,000 per holder in any 12-month period. ASIC Corporations (Share and Interest Purchase Plans) Instrument 2019/547 exempts the offer from the prospectus requirement where its conditions are met.

Key takeaways

• The relief is an ASIC instrument, not a section of the Act. A placement uses section 708, an entitlement offer section 708AA.
• The $30,000 cap is per registered holder, per rolling 12 months. Behind a custodian it is tested at the beneficiary.
• A discount is a condition of the exemption. The price must sit below the market price over a period in the prior 30 days.
• Listing Rule 7.2 exception 5 keeps the plan off placement capacity. Once in 12 months, 30% of securities on issue, 80% of the five-day VWAP.
• New Zealand runs the same product at different numbers. $50,000 a holder, 10% of the class, no premium to the placement beside it.

What a share purchase plan is

An SPP is the retail leg of an Australian secondary raise. The defined term in Instrument 2019/547 is purchase plan, and the definition is the product: an offer to each registered holder of a quoted class, on a date the issuer determines, on the same terms, non-renounceable, at a price below the market price, and with a total application price no greater than $30,000 in any 12-month period.

What the relief is relief from

Section 706 of the Corporations Act 2001 requires disclosure for an offer of securities for issue unless section 708 or 708AA says otherwise. Neither reaches an SPP: the offerees are retail holders rather than wholesale investors, and the offer is not pro rata. The exemption is ASIC's own. Instrument 2019/547, made on 26 August 2019 under subsections 741(1) and 1020F(1), relieves a body on the official list of ASX of Part 6D.2 and Part 6D.3 for an offer of shares for issue under a purchase plan, and switches off section 1012B and Division 4 of Part 7.9 for a listed registered scheme.

The conditions are the substance. The class must be quoted, and must not have been suspended for more than five days over the shorter of its quotation period and the prior 12 months — five trading days on ASIC's reading, with a trading halt not counted. No ASIC determination under section 708AA(3), 708A(2), 1012DAA(3) or 1012DA(2) may be in force. The Register lists a sunset date of 1 October 2029.

Why the plan follows the placement

Listing Rule 7.1 allows an issue of 15% of ordinary securities over a rolling 12 months without a shareholder vote, plus 10% under Rule 7.1A for an eligible entity that has passed the resolution; the arithmetic is on our Australia page. A placement consumes that capacity. A plan inside Listing Rule 7.2 exception 5 does not, and the shares it issues enlarge the base the next 15% is measured against. Exception 5 is narrow: once in any 12 months, no more than 30% of the fully paid ordinary securities on issue, at no less than 80% of the five-day VWAP, and unavailable where the shortfall is underwritten.

The cleansing notice is the second reason for the order. A standalone plan needs one lodged with ASX within a 24-hour period before the offer. Where the plan follows a placement and the issuer lodged a notice under section 708A(6) not more than 30 days earlier, ASIC's guidance is that no further notice is needed: the placement notice, which section 708A(6)(a) requires within five business days after the day of issue, carries both legs. The third reason is fairness, and ASIC states it — retail investors may be excluded from other fundraising opportunities such as institutional placements.

Pricing: a floor and a ceiling

ASIC requires an issue price less than the market price over a period the issuer specifies in the 30 days before either the offer or the issue, so the discount is a condition rather than a courtesy. ASX requires at least 80% of the five-day VWAP where exception 5 is relied on. Between the two, the offer document must give the pricing method and when the price is set, its relationship to the market price, and the risk the market moves before issue.

Scale-back, and the timetable

Demand is capped at $30,000 a head, not at the issuer's target, so an uncapped plan can be heavily oversubscribed. ASIC treats scale-back as disclosure: it expects the offer document to state that the issuer reserves the right to scale back entitlements. The issuer must also be reasonably satisfied before issue that no person crosses $30,000 across the plan and any similar arrangement in the prior 12 months.

Listing Rule 3.10.3 requires details of a proposed issue to reach ASX immediately, in the form of or accompanied by an Appendix 3B. Beside an equity facility or an at-the-market programme, a plan is one dated event with a record date.

How New Zealand sits

NZX runs the same product at different numbers. Rule 4.3.1(c) permits an issue offered to existing holders under a Share Purchase Plan, and the defined term constrains it: consideration under all the issuer's plans, other than one ratified by ordinary resolution, must not exceed $50,000 per registered holder in any 12 months; the number issued must not exceed 10% of the class on issue; and the price per security must not exceed that payable under any other offer announced with the plan. Oversubscriptions must all be accepted, or scaled only by holdings at the record date.

The notice vocabulary differs. The plan is documented by an Offer Document, which must set out each limb of the definition, and the notice that accompanies it is a QFP notice — which the rules define as a notice given under clause 20(1)(a) of Schedule 8 of the FMC Regulations. The NZX rules do not use the term cleansing notice at all. Rule 4.17.8 gives two routes, and under the first the record date must precede the issuer's announcement of the plan, with notice provided to NZX at least five business days before the ex date. More is on our New Zealand page.

Primary sources

• Federal Register of Legislation — ASIC Instrument 2019/547
• ASIC Regulatory Guide 125
• ASX Listing Rules, Chapter 7
• ASX Listing Rules, Chapter 3 (rule 3.10)
• Corporations Act 2001 (Cth), Chapter 6D
• NZX Listing Rules

• Australia
• New Zealand
• Equity facilities
• At-the-market offerings

Share purchase plans: frequently asked questions

What is a share purchase plan?

An offer by an ASX-listed entity to each registered holder of a quoted class, on the same terms, non-renounceable, priced below market, and made without a prospectus under ASIC Instrument 2019/547.

How much can you invest in a share purchase plan?

Not more than $30,000 per registered holder in any 12-month period, counting shares issued under any similar arrangement in the preceding 12 months. Behind a custodian it is tested at the beneficiary.

Do share purchase plans need a prospectus?

No, where the conditions of ASIC Instrument 2019/547 are met. It exempts an ASX-listed body from Part 6D.2 and Part 6D.3 of the Corporations Act 2001 for an offer of shares for issue under a purchase plan.

Why do companies do a placement and a share purchase plan together?

The placement raises the money inside Listing Rule 7.1 capacity; the plan lets the register buy at a comparable price. A plan following within 30 days can rely on the placement cleansing notice.

Does a share purchase plan use up ASX placement capacity?

Not where Listing Rule 7.2 exception 5 applies. It is available once in any 12 months, caps the issue at 30% of ordinary securities on issue, and requires 80% of the five-day VWAP.