Shares in Regional Express are in a trading halt after the corporate regulator hit the regional airline with a ban on using short-form fundraising documents for a year after censuring Rex for a continuous disclosure breach.
Rex’s shares were trading up 8% (at $2.03) on Wednesday morning after it announced that the Civil Aviation Safety Authority (CASA) had issued it a High Capacity Air Operator’s Certificate, clearing the regulatory hurdle before it could launch jet services between Sydney and Melbourne on March 1 next year.
But in a statement, ASIC said it would prevent Rex from using exemptions for reduced disclosure in fundraising documents for one year after a disclosure breach in May.
This was after the company’s deputy chair told The Australian Financial Review about its Sydney-Melbourne launch plans – and a $200 million equity raising to fund it – before it released news to the ASX.
ASIC said in the statement that REX’s deputy chairman John Sharp revealed to AFR on May 11 that the airline was considering commencing domestic operations, such as flying to capital cities, in addition to its regional operations.
This was published in an article the next day, along with REX’s plans to invest $200 million in the idea.
On May 13 Rex revealed in a statement to the ASX its plans for a proposed capital city plan and $200 million estimated cost to the market.
Following the announcement, REX shares surged from 90 cents to as high as $1.31 and closed at $1.19 – up 32% for the day.
ASIC said REX will not be able to rely on reduced-disclosure rules until December 14, 2021, and instead must issue a full prospectus in order to raise funds from investors following that interview with the AFR.
Rex then asked the ASX to halt the trading of its shares ‘pending the response to the ASIC Media Release dated today’ and said it would make a further statement by Friday.
ASIC has the power to prevent a company from relying on the reduced disclosure rules under if the company breaches its continuous disclosure or financial reporting obligations.
“ASIC considers the ability to use a reduced-disclosure prospectus a privilege that is dependent on compliance with other aspects of the law, including that companies meet their ongoing disclosure obligations,” the regulator said in a release.
“Where a company fails to comply with its disclosure obligations in a full, accurate and timely manner, ASIC will intervene to ensure that investors are protected.”
ASIC says its investigation into REX’s conduct is continuing and the airline has the right to appeal to the Administrative Appeals Tribunal for a review of ASIC’s decision.