Following talks with ASIC,smaller investors have now been given eight days to withdraw their application to take part in Westpac's capital raising.Credit:Wayne Taylor
The bank was thrown into crisis last week by a regulatory lawsuit that says it breached anti-money laundering laws 23 million times,including failing to adequately vet thousands of payments potentially linked to child exploitation.
Tribeca Investment Partners portfolio manager Jun Bei Liu,who holds Westpac shares for clients,said the withdrawal plan raises significant questions for investors.
"What do you do with the entire institutional raising? Is this an admission of wrongdoing? Is it opening a door to a class action and the like?"she said.
In early November,Westpac announced the capital raising, which was designed to'strengthen the balance sheet and support customers’ growth'. The raising was split between a $2 billion institutional placement – money raised from big investors – with retail investors adding up to $500 million to the haul.
Institutional investors bought shares at a fixed price of $25.32 per share. Retail shareholders could apply for up to $30,000 of shares at a price determined by the weighted average price over a five trading day period ending on Monday.
Jefferies banking analyst Brian Johnson said institutional investors were being hung out to dry as they"did not have the benefit of hindsight".
"And then we get into the horrible thing that you raise more capital at a cheaper share price which means it is more diluted,"he said.