Ann: Change in substantial holding, page-153

@madamswer

Totally agree with your point about Bell Potter's incentive to offload the shares as quickly as possible.

As for the margin that Bell Potter has before this deal goes sour for them, it's actually much wider than your level of $1.34 ($1.40 - 4.5%).

That 4.5% commission that Bell Potter got was based on the total size of the deal, i.e. US$40m. The dollar amount of the commission is 4.5% x US$40m = US$1.8m or at an exchange rate of $0.79, AUD$2.28m.

According to MSB, the institutional component of the entitlement offer was oversubscribed, i.e. Bell Potter didn't have to subscribe for any shares from the institutional offer.


With AUD$2.28m commission already earned, Bell Potter can afford for MSB share price to drop by a further $0.239 ($2.28m / 9,558,780 (no. shares to be issued under the Retail Offer)) before it loses money on this underwriting deal.

In percentage term, this margin is about $0.239 / $1.40 = 17.1%.

In dollar term, the crucial level for Bell Potter is $1.40 - $0.239 = $1.161.

In other words, assuming that Bell Potter ended up with a number of MSB shares after the Retail Offer ended, it could afford to slowly sell them in the market in a disciplined manner such that it retains most of its commission.

This also means that in the absence of positive announcement by MSB, MSB shareholders are probably about to face a number of weeks of weak price action.