Bendigo and Adelaide Bank is facing the prospect of having to abandon a A$50 million capital raising through a share purchase plan following a sharp slide in the company's stock price this week.
While the market turmoil caused by the Covid-19 panic is likely to have implications for capital management at other Australian banks, the impact on Bendigo is set to be more immediate.
The bank is due today to reveal the strike price for retail investors intending to participate in the SPP, and if the bank proceeds it is likely to be set at a premium to Bendigo's current valuation on the ASX.
According to the prospectus issued in February, shares purchased through the SPP will be offered at a 2 per cent discount to the average weighted price of Bendigo's ASX-listed scrip for the five trading days ending today (Friday March 13).
Since Monday Bendigo's shares have traded wildly in a range of $6.40 to $7.63. They closed on Thursday at the low end of that range at $6.50 and have lost more than a third of their market cap.
Bendigo's scrip would have to rally strongly by close of trading today for the SPP price to be offered at a discount to its market value.
If that doesn't happen Bendigo might be obliged to ditch the SPP because the offer would not be in the interests of shareholders who would be in a unique position to acquire shares more cheaply on the ASX.
The bank yesterday did not indicate whether the share issue would proceed.
"Following the closure of the SPP offer period at 5:00pm tomorrow, Bendigo will assess the applications received and within three business days announce the results in accordance with ASX Listing Rules," a bank spokesman said.
"The terms and conditions of the SPP have not changed from those that were announced on 24 February 2020."
Eric Pascoe, the Bendigo and Adelaide Bank monitor for the Australian Shareholders' Association, said he believed the bank would find it difficult to get existing investors to subscribe to the offer given continuing volatility on the stock market.
Pascoe, who could only comment in his capacity as an individual investor, said he had decided to not participate in the SPP.
"This is an extraordinary time for listed banks such as Bendigo and Adelaide Bank and it's probably an unfortunate time for existing shareholders to be asked to increase their holdings," he said.
Bendigo's CET 1 capital will remain well above APRA's "unquestionably strong" capital benchmark if the SPP does not proceed.
In February the bank completed a $250 million institutional placement priced at $9.34 a share, which boosted the company's CET 1 position by around 67 basis points.
The CET 1 ratio would rise by another 10 to 14 basis points if the SPP meets the bank's target of $50 million.