ASX BookBuild brings democracy to the Australian stockmarket

To be successful today in online broking it’s vital to deliver value and service. Enabling

participation in initial public offerings and other capital raisings is the ultimate for the demanding

self-directed investor writes Andy Rogers, Head of CMC Markets Stockbroking.


Until recently many Australian investors with online brokers were unable to participate in initial

public offerings (IPOs) or other capital raisings. With the advent of ASX BookBuild this has changed,

and his clients are now able to enjoy the democratisation of the market to gain significant return on

their investments. On the flip side, Australian companies looking to raise equity now have a fairer

and more transparent option that delivers the highest standards of corporate governance.


Post GFC, Australian investors are coming back to the market in droves and despite a tendency for

the safer ASX200 blue chip stocks, there’s a definite renewed interest in IPOs. However, for many

‘mum and dad’ investors it can be difficult to access shares in an IPO because the IPO lead manager

gives priority to larger retail and institutional brokers. Now, with the ASX BookBuild facility, all

brokers can access IPOs that use the facility enabling their clients to participate and obtain stock via

their online trading platform.


Democratising the market for retail investors


I’d like to take a look at a recent ASX BookBuild success story, which illustrates the benefits to

investors that IPOs can bring. Stavely Minerals, which recently raised $6million in a fully subscribed

IPO using ASX BookBuild, went on to rise more than 200 per cent on its 20-cent issue price. This is

compelling reading for any investor but the real beauty of the ASX BookBuild system is its simplicity.

Now, investors need only have one online broking account (reducing admin burdens) and the stock

is automatically credited upon settlement.


Clearly there are pros and cons to investing in an IPO, and investors are encouraged to look at all

financial and company history available, so they can gain a feel for the potential of a particular stock

over time before taking the plunge. But the salient point here for retail investors is that they now

have the choice and opportunity to bolster their existing investment portfolio with Australia’s next

potential blue chip stock, from day one.




On the other side of the coin, for directors of companies looking to IPO and raise equity capital there

are a number of key considerations to take into account, as few tasks are more challenging than

raising equity.


Whatever the purpose – acquisition, debt repayment, or just working capital – you can be sure that

shareholders will be watching closely and will want you to adhere to the highest levels of corporate



Added to this, institutional shareholders want an attractive price. As a securities dealer, your

investment bank wants to accommodate its best clients, and as the underwriter it wants the issue

put away quickly. Smaller shareholders wish to avoid dilution. All this takes place while broking

analysts, the media, ASIC and the ASX have ring-side seats.


One of the key concerns CEOs and CFOs have when going through the IPO process is lack of

transparency into the market. Not being able to see the live price and bidding volumes leaves what

feels like a ‘black hole’ of unknowns.


Maintaining control over price and allocations is also key. The ASX BookBuild facility enables

companies to decide what percentage of allocations should go to existing shareholders, priority

bidders, and on-market bidders. Companies may also want to know how many times the book

should be covered and use their judgement and skill to ensure both a strong aftermarket and an

optimal outcome for the company.


The beauty of ASX BookBuild is that it delivers to all of these criteria and provides a fairer and more

transparent option to the traditional off-market model. In essence it enables any broker to join in

the IPO process so their clients can access stock in capital raisings, thus reaching a far greater



By virtue of having more bidders into the book, a company will bring about efficient price discovery

and therefore a truer reflection of what their new shares are worth. This in turn, gives companies

the ability to make more informed decisions during the capital raising process and raise capital at a

narrower discount. All of these core benefits assist CEOs and CFOs in meeting corporate governance



In summary, ASX BookBuild has brought democracy to the Australian stockmarket for investors and

companies alike, and is well worth a look for your long term financial outlook.

Business First is a peer-to-peer magazine: written by CEOs and other high level executives, with interviews with some of the country’s best leaders.

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