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54.5¢ slater & gordon limited

Ann: PSD Acquisition and Entitlement Offer - Presentation, page-111

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TheNaturalOrder

61 Posts.

19/04/15

11:15

Post #: 15113730
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Originally posted by TheNaturalOrder ↑

3) Suppose the SP is higher than the offer price at the time of the bookbuild, but the bookbuild price ends up being much less than the SP. Then you get screwed because you don't get much capital return, and it's expensive to purchase shares on the market. You obviously don't want this scenario to play out. It's most likely to happen if there's a lack of interest from retail investors resulting in a huge number of shares to sell off at the bookbuild (and/or institutional investors don't want much at the bookbuild). Institutional investors, on the other hand, might benefit quite nicely from this scenario. Suppose they were able to scare off flighty retail investors by pusing a few extra shares into the market when the deadline is approaching, thereby pusing the SP lower. They could then buy back into the retail bookbuild at an even lower price again! This is a scenario all retail investors should be quite wary of.

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It's also worth noting that big entitlements offers can be targeted by hedge funds who short sell the stock in an attempt to drive a bookbuild shortfall. The following link mentions this occuring to Primary Health's entitlements offers offer a few years back: ASIC's crackdown on share manipulation

SGH Price at posting: $6.87 Sentiment: Hold Disclosure: Held
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