The 3 key benefits of calling shareholders during capital raises

When it comes to shareholder-based capital raises – think Share Purchase Plans and Rights Issues – most companies and their advisers just send the offer documentation and wait for what comes back.

Often, the companies that most need the capital only have a small portion of the register actually fill out and return their acceptances.  This outcome is not ideal for the company, and for the advisers who may have underwritten the raise. 

Drawing on our expertise from supporting hundreds of corporate events annually across the globe, Morrow Sodali sees 3 key benefits from calling shareholders during capital raises.

These 3 key key benefits are:

1.    Maximises capital raised by corporates
Shareholders have busy lives, and it is easy to miss the offer documentation if it comes by post or email.  Often when Morrow Sodali speaks with investors they are not even aware that a capital raising is taking place.  On average, calling shareholders results in an average 30% increase in participation and presents a substantial ROI for corporates or their advisers. 

2.    Minimises the underwriting risk to the brokers
A significant number of capital raises are underwritten by the brokers.  Sometimes this is fine when the shortfall can confidently be filled.  However, at other times, having a poor level of acceptance from retail investors places an enormous level of underwriting risk on the broker.  By calling shareholders and informing them of the raise, the increased level of acceptances reduces the underwriting risk to the broker.

3.    Increases positive sentiment amongst shareholders
Calling shareholders presents an opportunity for a company and its advisers to engage with shareholders.  Scripts are tailored to ensure investors are informed of the company’s long-term strategic objectives and the rationale of the capital raise.  This often has the effect of increasing positive sentiment amongst the contacted shareholders.

When our professional in-house call team calls shareholders, our results exceed expectations. Of the universe of shareholders, we target, reconciliation reporting shows an average of 30% increase in shareholder participation when compared with the portion of registers not within the target group.

We welcome the opportunity to discuss our shareholder engagement services with you.  Please reach out to Marc Stanghieri for more information at m.stanghieri@morrowsodali.com or M. +61 450 941 910.