boart sold on issue rip-off

Terry McCrann - news.com.au

August 18, 2009 12:00am

MINING drilling company Boart Longyear has joined the lengthening list of companies to screw over their retail shareholders. With a special additional nasty twist.

Boart is doing so with a combination of a deeply discounted non-renounceable issue to all shareholders and an accompanying placement to institutions -- both shareholders and non-shareholders alike.

All the shares are being sold at 27 -- a massive 39 per cent discount on Boart's 44 last closing price. And the very fact of their issue will likely boost the share price in relative terms -- delivering an even bigger profit to the lucky ones and an even bigger relative rip-off to the rest.

The basic issue is fair in theory, as it's pro-rata to all shareholders. In practice it's not, as many small shareholders won't or can't take up their cheap shares; and they will then be handed out to the instos.

The placement is a huge dilution of those small holders. It takes real dollars out of their pockets and hands them to the instos.

With a nasty twist. Because the placement is so huge, only part of it is unconditional. The second part requires shareholder approval. Theoretically, those getting their fingers in the pie can't vote.

So if the 'other shareholders' approve the placement, Boart says it will follow through with a Share Purchase Plan.

Approve being screwed, and Boart will include retail shareholders in on the rort. But only some of them, only partially, and in an essentially unequal way.

That's close to a first. A company ripping off its shareholders and expecting them to be stupid at the same time.

Boart is a corporate disgrace. It should have at least committed to the SPP after the first part of the placement, not made it conditional on approving the second.

Goldman Sachs, Macquarie, Merrill Lynch and RBS all get to share in the millions of dollars for handing out free money. Portsea and Palm Beach real estate is saved again.