capital raising, page-100

From CW

"Participants in the Placement shall have a right to be issued with non-transferable unlisted options to subscribe for fully paid ordinary shares in Alchemia Oncology Pty Ltd if de-merged by 31 December 2012 (Oncology Options) with an aggregate value of up to 50% of the amount invested through the placement. Refer slide 35 of the presentation for full details of the Oncology Options. Participants in the SPP will not have the right to participate in the issue of the Oncology Options."


A company can raise 15% under the ASX LR without shareholder approval. Professional investors often get a better deal than retail because of the costs, time etc involved.

A fundamental principle under the Corps Act is that all shareholders must be treated equally. So if ACL is to be split between Fonda and Oncology then existing holders would receive a pro-rata share of that split.

The question is not the fact that an unlisted option will be issued to professional investors only. My view on reading the above is that this option allows pro investors to subscribe for an amount up to 50% of the amount invested in the capital raising.

The critical question is what is the proposed strike price of this option? That is the amount of cash professional investors must pay to acquire each ACL Oncology share? Remember an option is only a right to subscribe for shares at a certain value.

Now if the option is just a right to subscribe for shares in ACL Oncology at a future price in a later CR then that tells me that the option constitutes a preferential allocation. This meaning that they will have a priority to subscribe for any shares in a future CR. That would indicate that there is expected to be a high demand for the Oncology company shares, which I see as beneficial as it implies a high demand for them. The critical issue for me will be whether or not a cheap conversion price attaches to the options.

I for one will be watching this proposed restructure closely and if there is any inkling that I as a shareholder am being materially disadvantaged then my view is the matter must be taken up with the US and Australian regulators (ASIC/ASX in Australia and the SEC in the US).

At this stage I do not know how they propose setting up in the US or whether ACL Oncology is proposing listing via ADRs (Approved Deposit Receipts) or whether they will seek an exemption under the US Investment Companies Act of 1940 (as amended). This proposed structuring I watch with interest, especially considering the implications of Dodd-Frank, which is a massive piece of US legislation aimed at protection investors. Either way I would be very surprised if ACL undertook a course of action that would expose them to risk in either jurisdiction, especially the US.

We will wait and see.

Cheers