time to look closely at the drp rules

I have just been scrutinising the DRP rules.

The dividend is proposed to be declared on 30 April.

The DRP pricing period starts on the 9th trading day after that and continues for 20 trading days.

The distribution will be 0.05c per share, which amounts to $200k total.

Macquarie were paid $14 million dollars to underwrite a $200k dividend payment. WHAT A RORT !

BCS assert in their most recent statements, that a broker values BCS at $1.28 on a fully paid basis. If you accept this at face value, the BCSCB units might trade around 28c each during May 2009. Its as good a guess as any. In which case, the DRP issue price will be, say, 27c.

By way of example, a unitholder who bought 10,000 BCSCA units in the IPO ( or subsequently ) will be entitled to a distribution of $5, which will result in the issue of 18 BCSCB unit by way of the DRP. ( the number is rounded down ).


The other thing I was looking at, was whether there was any way for the DRP underwriter to somehow scam the DRP issue and take control of the project ( what a pyrrhic scam that would be ! ).

The answer would appear to be, no. Suppose every unitholder elected to choose to take their distribution in cash. Then the DRP underwriter would apparently be required to subscribe for $200k worth of units at 27c each, which would be 740k units. This would be about 0.2% of the units on issue so it would not be very dilutionary, or give the DRP underwriter a controlling holding. It should be noted that they will be gaining that holding at least 75% cheaper than any existing unitholder has.

HOWEVER, the project budget assumes that about $300m will be raised over time either through DRP re-investment by unitholders, or through DRP underwriting. Either way, $200k comes nowhere close to that at all.