Private placement

Question 1

Private placement

Placements can be

Answer 1

underwritten and they can be a very inexpensive way of accessing equity, as low as 1.25% of funds raised.

Question 2

Private placement

Answer 2

Equity can be placed directly with institutions and individual investors without the need for a disclosure document.

Question 3

Private placement

Book build is an increasingly

Answer 3

popular mechanism for private placement — less likely to be underpriced.

Question 4

Private placement

private placement is becoming

Answer 4

Due to large sums of money in hands of fund managers and speed of private placements, they have grown in popularity relative to rights issues with more placements than rights issues

Question 5

Pros of private placement

Answer 5

Can be quickly arranged and finalised.
Lower issue costs than a rights issue.
Board can direct the placement to ‘friendly parties’.

Question 6

Cons of private placement

Answer 6

• Dilution of proportion of the ownership of the company for non-participating shareholders.
• However, existing shareholders are protected by the ASX listing rule that a company can only place up to 15% of the issued shares in any 12-month period without the need for shareholder approval.

-Placements at a discount to market will reduce the value of existing shareholders’ investments.

Question 7

what is a placement?

Answer 7

If management decides to raise funds from selected investors, who may or may not be existing shareholders in the company