CBA cancels share issue and restarts at lower price after investor complaints

The reaction to Commonwealth Bank of Australia's on again-off again capital raising has been brutal. It has been described as a "debacle", a "shambles", a "botched bungle", a "major embarrassment for Ralph Norris", a "fiasco" and a "farce". CBA had declared victory on Tuesday, saying it had raised A$1.65 billion at A$27 a share through a share placement by broker Merrill Lynch. But early on Wednesday morning it declared the capital raising had been cancelled and restarted it at A$26 a share through an underwritten deal by UBS. Then the finger pointing started. CBA said it was disappointed that Merrill Lynch had not passed on to institutional investors a warning about CBA's expectations of higher bad debt charges. Merrill Lynch has denied CBA's version of events. The fact that the warning was not given to the market broadly until after the news of the capital raising remains a problem for CBA. Questions about disclosure will be raised. Suffice to say, the whole affair has damaged CBA's reputation and caused a sensation in Australia's capital markets. Ralph Norris' aggressive attacks on Merrill Lynch's reputation and his refusal to pay Merrill's fees may yet rebound on him and CBA. Meanwhile the fees and the extra dilution of shares is expected to cost CBA north of A$100 million. Here is the best skewering of both CBA and Merrill, courtesty of Alan Kohler at businessspectator. * This article was first published yesterday in our daily subscription newsletter for the banking and finance industries. The email costs NZ$365 per annum and carries exclusive news and analysis for New Zealand banking and finance industry executives, regulators and investors. Sign up for a free trial here.