Mitchell Asset Management challenges Identitii Limited’s recent rights issue, alleging it could unfairly boost Beauvais Capital’s stake close to 50%, sparking a potential showdown at the Takeovers Panel.
- Mitchell Asset Management applies to Takeovers Panel over Identitii rights issue
- Rights issue could increase Beauvais Capital’s shareholding from 29.92% to 49.91%
- Concerns raised over pricing above market, shareholder dilution, and foreign shareholder compliance
- Applicant seeks to halt share issuance and terminate underwriting arrangements
- Potential restrictions proposed on Beauvais Capital’s future voting power and underwriting roles
Background to the Dispute
Identitii Limited (ASX – ID8), a company operating in the financial services sector, finds itself at the centre of a contentious shareholder dispute following its announcement of a 1 for 2 non-renounceable rights issue. The offer, priced at $0.007 per share to raise approximately $2.88 million, has drawn scrutiny from one of its shareholders, Mitchell Asset Management Pty Ltd, which has lodged an application with the Takeovers Panel.
The crux of the issue lies in the potential for Beauvais Capital, currently Identitii’s largest shareholder with a 29.92% stake, to significantly increase its ownership to nearly half of the company’s shares; up to 49.91%; through underwriting the shortfall in the rights issue. This prospect has raised alarms about the balance of control within the company and the fairness of the capital raising process.
Key Concerns Raised by Mitchell Asset Management
Mitchell Asset Management’s application outlines several concerns. First, the rights issue price is set above the recent market price, which may discourage other shareholders from participating, effectively allowing Beauvais Capital to increase its stake by default. The non-renounceable nature of the offer means shareholders cannot sell their rights, exacerbating dilution risks for those who do not or cannot participate.
Further, the applicant alleges that Identitii has not complied with certain foreign shareholder provisions under the Corporations Act, potentially complicating the legality of the offer. They also argue that Identitii has overlooked alternative, less dilutive funding options and failed to engage meaningfully with Mitchell Asset Management’s offer to partially underwrite the rights issue.
Implications for Corporate Governance and Shareholder Rights
The application seeks interim orders to prevent Identitii from issuing new shares without the Takeovers Panel’s approval and to hold subscription monies in trust pending resolution. It also calls for final orders to terminate the current rights issue and underwriting arrangements, and to impose restrictions on Beauvais Capital’s ability to increase its voting power or underwrite future share offers.
This dispute highlights the delicate balance companies must maintain between raising capital and protecting shareholder interests, especially when large shareholders stand to gain disproportionate control. The outcome could set a precedent for how rights issues are structured and challenged in the ASX environment.
Next Steps and Market Watch
As of now, no sitting Panel has been appointed, and no decision has been made on whether to conduct proceedings. The market will be watching closely for the Takeovers Panel’s response, which could influence Identitii’s capital raising strategy and shareholder dynamics. Meanwhile, shareholders face uncertainty over potential dilution and control shifts as the rights issue closes.
Bottom Line?
The Takeovers Panel’s forthcoming decision will be pivotal in defining control and fairness in Identitii’s capital raising saga.
Questions in the middle?
- Will the Takeovers Panel intervene to halt or modify Identitii’s rights issue?
- How might Beauvais Capital’s potential near-50% stake affect Identitii’s governance and strategic direction?
- Could this dispute prompt tighter regulatory scrutiny on rights issues and underwriting practices in Australia?