Placing is another way in which listed companies can raise capital, and is the issue of securities to selected persons. Listed companies usually employ a placing broker to help identify interested investors.
Listed companies may ask shareholders for a general mandate allowing the board of directors to increase the company's share capital by up to 20% each year. Most listed companies ask the shareholders to approve this kind of mandate in the annual general meeting. Once it has this mandate, and provided it does not exceed the limit approved by the shareholders, the board does not need to ask the shareholders for approval before making a placing at any time during the year. If the board wants to issue more than the approved amount, it must get approval from the shareholders first.
When a listed company wants to conduct a placing, it must publish an announcement disclosing the details, such as the reasons for the placing and how the proceeds will be used.
Who can the company place shares with?
A company must satisfy the Stock Exchange that the placees are independent, and has to disclose their names if there are less than 6 of them. If there are 6 or more placees, the company has to give a generic description of the placees. GEM companies have to make more specific disclosures if there are different groups of placees.
How about top-up placing?
- A company can also raise funds by way of "top-up placing". Under this arrangement, the major shareholders place their existing shares with independent persons, then subscribe for additional new shares. Again, a placing broker usually helps identify interested investors.
- In a top-up placing, the new shares' issue price cannot be lower than the old shares' placing price. Also, the number of new shares to be issued to the major shareholders must not exceed the number of old shares placed by them.
- If the issue does not exceed the amount of the general mandate and the major shareholders complete subscription of the new shares within 14 days after executing an agreement to reduce their shareholdings in the class of the old shares being placed, shareholders' approval is not needed.
- As with a placing, companies have to satisfy the Stock Exchange that the placees are independent. The disclosure requirements for placees are the same as for a placing.
Fund raising activities are part of a listed company's commercial decisions, and regulators are generally not in a position to intervene in them. However, companies must ensure that all rules and regulations are complied with when they go to the market to seek further funds.