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The majority of companies sought to raise gross proceeds of less than £200 million with eight companies raising £200 million and above. The largest fundraising overall in the period reviewed was the cash box placing and retail offer by Compass Group plc which raised £2 billion with the new shares representing 12.3% of its existing issued share capital. The largest fundraising by an AIM company was the cash box placing by ASOS which raised £247 million with the new shares representing 18.8% of the company’s existing issued share capital.

Pre-emptive issues

The only rights issue announced in the period reviewed was by Hyve Group plc on the Main Market which is seeking to raise £126.6 million. The two companies which announced open offers were Cathay International Holdings Limited (Main Market) and Amiad Water Systems Limited (AIM) which sought to raise £105 million and £17.6 million respectively.

Generally, a large pre-emptive offer will require a prospectus as it involves an offer to the public and both Hyve Group and Cathay International published a prospectus. The open offer by Amiad Water Systems fell under one of the exemptions from the requirement to publish a prospectus for an offer to the public as the consideration for the open offer part of the fundraising was below €8 million.

Open offers and rights issues are required to be kept open for acceptances for at least 10 business days (guidance notes to Rule 24 and 25 of the AIM Rules and LR 9.5) and may require shareholder consents which will lengthen the fundraising timetable. Hyve Group needed to seek shareholder approval for a share consolidation and the authority to allot shares under the rights issue which lengthened the time to completion of the transaction. The notice period for a general meeting and the offer period for a rights issue must run consecutively as the ‘nil paid’ rights which are admitted to trading first cannot have any conditionality attached to them. An open offer can be completed on a shorter timetable than a rights issue where a general meeting is required as the offer period can run concurrently with the notice period for a general meeting.

One advantage of a rights issue is that there is no regulatory restriction on the price at which the rights shares can be offered and accordingly they are useful for large fundraisings at a deeply discounted price. Hyve Group offered shares at a discount of 67.8% to the market price (as adjusted for the share consolidation it was undertaking).

Placings and cash box placings

34 companies in our data set completed non pre-emptive placings (21 on the Main Market and 13 on AIM) all structured to fall within the exemptions from the requirement to produce a prospectus (excluding the issue by Supermarket Income REIT Plc under its placing programme).

Implications for lawyers

It is likely that the trend towards quick non pre-emptive placings of up to 19.99% of existing share capital will continue into the summer as companies make use of the relaxed limits in PEG’s  (in place until 30 September 2020) combined with the exemption from the requirement to issue a prospectus where less than 20% of share capital is being issued. Although cash box structures have been viewed with distrust by investors in the past, institutional investors are likely to be more supportive of these structures (as evidenced by Schroders’  to UK PLCs) provided that issuers maintain a dialogue with shareholders about the capital raises including clarity on working capital needs, any potential litigation and significant changes since the last report and accounts. PEG’s guidance also outlines the need for proper prior consultation with major shareholders. Companies with sufficient existing shareholder authority to allot shares (which is typically taken over one-third of issued share capital at annual general meetings) will be able to undertake cash box placings without being required to call a general meeting. For further information on cash box placings, see Practice Note: . Lawyers acting for issuers should check existing shareholder authorities and whether any shares have been issued since the last annual general meeting.

Where a general meeting does need to be convened, the government’s social distancing measures will need to be taken into account. The companies calling general meetings in relation to secondary offers in our data set have sent out a notice of general meeting in the usual way but encouraged shareholders to vote by returning a form of proxy appointing the chairman as proxy. Companies have also warned shareholders that they may be denied access to the general meeting if they do try to attend in person.

If a general meeting is held, it may be prudent for the company to take the opportunity to amend its articles of association to allow for hybrid general meetings where shareholders may attend either at the physical location of the meeting or by electronic means. For further information see Practice Note: .

Where a prospectus is required, lawyers should review the measures introduced by the FCA in its aimed at assisting listed companies raising new share capital. These measures include, among other things temporary relaxations of the FCA’s approach to working capital statements and holding general meetings relating to class 1 and related party transactions. For full details, see .

List of placings and cash box placings

The table below contains a list of the placings and cash box placings reviewed raising at least £10 million on the Main Market and AIM during the seven week period from 1 April 2020 to 20 May 2020.