Macquarie Retail Share Purchase Plan Resounding Success

Post by Sharat on June 3, 2009 · Under news · Comment

Australian investment banking major, Macquarie Group drew an extremely positive response to the retail part of its capital raising exercise, raising over triple the amount it was seeking.

Macquarie raised $669 million for its retail investor base and said that of its 133,000 retail investors, it received applications from 55,000 or 40 per cent of eligible shareholders.

The capital raising produced the largest ever retail response on record surpassing the 2007 equity offer by Macquarie which generated a 20 per cent take up rate from 71,000 investors.

Macquarie’s initial goal of raising $200 million through the share purchase plan was easily exceeded; suggesting that retail investors are sanguine about the outlook for the stock, with the capital raising being the first time retail demand for the banks stock was greater than institutional demand.

The equity placement has resulted in a dilution of existing shares, but that has not had a negative impact on Macquarie’s share price which has risen substantially over the last couple of trading sessions, having gained over 14 per cent.

Macquarie has not been able to explain the sudden rise in its stock price after being asked by the ASX to do so.

Macquarie’s CFO said with the institutional placement, Macquarie had managed to raise $1.2 billion which would boost its capital level.

“With the strong support we received from institutional investors recently, this demonstrates significant demand for Macquarie Group shares,” Mr. Ward said.

Macquarie’s recent measure to align manager’s long term interest with that of its shareholders by distributing a greater proportion of bonuses in shares rather than cash could increase capital levels by a further $500 million.

The plan has been put on hold after the federal Government flagged in the budget, changes to the current tax arrangements for executive share schemes.

If the changes to compensation structure do become effective, the investment banking group plans to issue another $500 million shares, which would take the overall amount of equity raised to $1.7 billion.

Macquarie is understood to be in the process of preparing a parliamentary submission arguing against the changes that the government is proposing.

“Macquarie will continue to assess the impact of the proposed legislative changes as further details emerge and will update the market when it is in a position to do so, including on potential revised arrangements to meet Macquarie’s remuneration objectives,” the bank said in a statement.

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