I am very cynical about the way listed companies raise money. The practice is fairly similar around the world. I have been engaged in capital raisings from different perspectives, i.e. both as an analyst writing research to promote issues, as an analyst under some pressure to sell a lemon, as an investor, and I would say the existing process is inefficient for all concerned, to the point of being unfair.
The problem is greatest for small stocks firing on one cylinder. Maybe its not their place to set standards...maybe there is a need for an entirely new way of conducting equity raisings. I personally favour an incremental path to capital raisings so that companies can dispense totally with brokers and even issues. I would suggest companies are allowed to release new stock based on a model which incorporates the following considerations:
1. Rising share price - it can only raise money when the moving average of the share price is rising, and it can only buy back shares when it is falling
2. Market liquidity - based on turnover, market spread & depth - the company could only issue 10% of the moving average for its share trading for the previous 5 days.
3. Market capitalisation - the company can only issue 1% of its market capitalisation in any one day.
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