wow, page-21

I believe the ASX capital raising provisions are in need of an overhaul.

The first thing I would enshrine is a rule that no shareholder (= part owner) of a company can be diluted without being given the opportunity to participate in a capital raising, whether it be by placement, rights issue, SPP or anything else. I don't see how diluting an owner's holdings against his/her will can be justified. In fact I'm surprised it's legal. I wonder how it would stand up in court if contested. I'm speaking generally here, not specifically in respect of this stock.

I understand, however, the points made by cbholding and others re the practicalities of a company's management trying to raise capital. It might be easier to simply have a broker ring some select SI's or insto's and get it done rather than spend time and money chasing up all the mums and dads with barely marketable parcels. I believe any procedural barriers should be simplified wherever possible to allow all who want to participate to do so - eg rights issues requiring a prospectus. Some also say the SP is more likely to retrace if a SPP is done, although there's also a view that it's the insto's and particularly the SI's that are more likely to churn the stock and take a quick profit than smaller holders who believe in a company. Maybe it depends on the circumstances of each case. It also might be true that the smaller shareholders cannot match the capital that the insto's would like to put in. That doesn't mean however that any owner who doesn't want to be diluted should be prevented from participating.

As an example, I'd like to see something like:

Company ann: - management has decided to raise capital by placement of A shares @ B cents to raise $C. This will have the effect of diluting the value of each existing share on issue by D%. Under the anti-dilution provisions any shareholder who wishes to do so may apply to the company within the prescribed period to obtain the paperwork to allow a purchase of a commensurate amount of shares to retain their relative holding.

This is just off the top of my head and perhaps there are things I'm overlooking but I believe the overall outcome is worth pursuing. As it stands I believe the system is unfair.