Ann: Trading Halt, page-27

What is a capital raising?

Put simply, capital raising is a mechanism for an ASX company to raise money.

Companies typically have 3 options if they are in need of more capital.
The first is to sell assets.
The second is to borrow money in the form of issuing bonds (which is the company equivalent of an individual taking out a bank loan).
And the third is a capital raise.

Capital raising typically involves offering new shares (representing ownership of the business) to investors in an off-market deal. Normally, a company’s shares remain relatively fixed at a certain volume.

That way supply and demand for the fixed pool of shares enables the market to set what we call the share price of said company.

But if a company needs extra money, it will offer new shares to investors at a fixed price (usually at a small discount to the shares’ recent ASX price).

This can be an easy way to raise extra dough for the company if times are tough (like they are right now).But it’s usually the method of last resort for cash-strapped companies that (for whatever reason) can’t sell assets or go to the bond markets.