Whether retail shareholders participate fully will likely...

Whether retail shareholders participate fully will likely informed by how the stock trades after the institutional component completes.

Retail shareholders seldom think they have any advantages, but in cases like this, you get to wait until the last day to see if the stock is trading above the raising price before you bid. Even if it trades below, you will get it cheaper than the insto's.

The smaller you are, the luckier you are too, depending on the scale back that results. As @madamswer points out, the company had a poor outcome last time they used an SPP, but this is a very different business, with a greatly increased retail shareholder base. I would hope they will take at least twice the $5m they have mentioned in the offer documents from retail, because it will enhance their reputation for being shareholder friendly.

As to the likelihood of the share price trading below the offer price, I'd be flabbergasted if it did. They have previously issued graphs that show that April is one of the weaker months in their trading year:


But if the revenue run-rate they had in April holds for all of 2020, they'll generate $1,965m of revenue (the boldest forecast I've seen was for $1,870m after the Q1 upgrade). The same graph from above shows that approximately 25% of annual PBT is usually earned by the end of April (33% of the year complete). If the PBT margin of circa 4% announced on 29 April holds, then they've earned PBT YTD of about $24.9m, which puts them on track to go very close to $100m (the boldest PBT forecast I've seen is for $66m) for 2020 if trend graphed above holds. Even the 4% PBT margin on $1,965m of revenue would translate to $78.6m of PBT, which is about 20% above the highest forecast in the market.

It is fair to assume that some future revenues have been pulled forward by the COVID-19 behaviours of people, but it has also introduced new customers to Dicker Data that will be sticky post-pandemic. As a long-term shareholder, I have been told that the last 4 times they moved warehouses, substantial revenue growth followed every time. They will double their warehouse footprint later this year, unwinding enormous space constraints in their present warehouse. I'd hazard the tailwind stemming from that will more than offset the decrement in revenues any "pull-forward" has created.

The criticism of raising capital when they have paid out so much in dividends is an understandable one, but like most highly successful people, David Dicker is an idiosyncratic individual with his own view of how the world should work.

I attended the 2012 AGM sometime after acquiring my first shares in Dicker Data, this was about 6 months after the company first announced (April 2012) the intention to use a quarterly dividend to distribute approximately 100% of NPAT. Not having encountered such a policy, I used the AGM Q&A to inquire as to the reasoning behind it...

David Dicker went into a lengthy speech about the sole reason for a company's existence being to provide a return to its shareholders, he told a story (my recollection may be imperfect) about how "10 years ago, MSFT traded at $28 per share, today, MSFT trades at $28 per share. All shareholders have received is about a 1% annual dividend in all that time despite the company earning billions". His view was that payment of dividends forces a business to respect its capital and that if a really good use for equity came along, they could either raise some, if the price was attractive, or reinvest the dividends.

Now as it turned out, MSFT has "6-bagged" in the intervening 8 years, so the retained capital eventually paid off. But DDR has approximately 14-bagged in the same period and they paid out 100% of their earnings along that road.

The substantial retail shareholder base Dicker Data now carries will undoubtedly bid for a lot more than the $5m on offer, for what its worth, I emailed management this morning and told them if I were in their shoes, I'd be inclined to scale the retail component up - Eternalgrowth