I agree and I think that this idea of favouring a new Soph investor is gaining ground . Look at WBA - They did a placement of 15% at the same price as the offer to shareholders which is now a renounceaable right as all 15% have been placed - the price is the same but the LDR for the distribution is such that shareholders who take up their rights wont participate but the new ( ex director by the way who has now bought in ) will get to participate in the distribution and by the way also in the renounceable rights offer.
This process which was increased to the 15% by ASIC was never as I understand it created to allow this and was for a specific purpose. Post the GFC this has been abused and brokers and soph's make a nice living out of being good traders taking a small risk and even at time's short selling their allocation to lock in profits. Retail investors are like lambs as they drive a great return for brokers but at the same time as they are a retail trader they /we get the worst of it.
A lot of these rules are not allowed overseas - accelerated offers are able to be made but normally to existing shareholders and underwriting is where the bankers make their money.
I cannot see how this move has benefited any existing shareholders - They could have started their drilling program started to release news that we know should be as expected and drive the sp back up. Now we have a situation that we have cash and are not desperate but management want to secure the finance so that they have no risk at all. so who benefits you sell 15% at a very low ball offer the company does not acre it secures the future for next year of the entire team. then you have more shares in issue and you never give shareholders the return they should be due. You just keep diluting them each year with another 15% issue. after 3 years most shareholders are so diluted that even if the business is successful a real big profit has been destroyed.
Its not a wonder that I ask people why they dont buy shares and they tell me of nightmares they had and then are happy to invest in Super where I read my GF's report this past year her Growth portfolio in a teachers fund was 1.99%.
Personally for the first time ever I have started to look overseas at jurisdictions where I can trust the market ( No 15% gifts to Soph's) and value the resources sector based upon the same metrics as here. By the way they are cheaper on brokerage as well at times. Yes exchange risk but its a commodity normally trading in US$ so who cares where it is.
Look at a few websites dealing in new listings here and see how many of them are in the red early and go back and see what has happened to some from 4 years ago. each year diluted at less than last year.
Sorry we get what we deserve as none of us ever really challenge management by firing them at meetings and the remuneration stick keeps getting weaker as management lobby ASIC. Personally i have absolutely no faith in ASIC.
MEL Price at posting:
22.0¢ Sentiment: None Disclosure: Held
