Ann: Section 708A Notice - Tranche 1 Placement Shares, page-46

'They don't have to invest wholesale amounts'

Yes, true, but someone whose net worth is over $2.5m is not getting good value for their time buying $5k worth of stock at 0.006 to (hopefully) in a perfect world sell at 0.008. They make a stag profit of $1,250... minus brokerage, probably pay capital gains tax on it and they or their accountant has to do the book work. Meanwhile, if for example they have a $2m share portfolio and the market has dropped only 3% since they bought that stock, they have lost $60k on paper, making a $1k capital gain pretty trivial.

I can't speak for the median sophisticated investor, who is no doubt a bigger fish than me, but if I'm going to take a punt on a placement and I've done my due diligence sans prospectus, I would want to take at least $20k worth of stock. In fact often the company I deal through on most of these offers sets a minimum investment, which can be anywhere from $25k up to $500k for some weird unlisted property development type 'opportunities'. So most of the time wholesalers are risking significant capital on less than transparent situations and from personal experience we sometimes get taken for a ride.

The term 'sophisticated' probably gives the wrong impression that 408s are smart operators with inside information or contacts. Some certainly are, but others are just reasonably well off speculators who know nothing more than any other market punter. If you have never bought a share in your life but own a house in the right part of Sydney or Melbourne you can be a 408 investor. It's nothing magical, that's for sure.

I agree it's an advantage, just like being a Commsec 1 member is an advantage or having the ability to monitor stocks during the day when many people have to work is an advantage, but it's definitely not a license to print money like being a listed company director is. Being an investor on the Australian bourse is a tough game to win at for anyone.