Does unfairness exist between various shareholders?

[pythagoras]

Hi Folks,

I'm new to investing (2 weeks), and one of the businesses I have research and invested in seem to value 'Institutional investors' more so than 'retail investors', even though the equity that is being raised is similar in scale and, purpose is the same.

Now, the business in question doesn't pay dividends, however, seems to hand-out lucrative stock options prior to announcements and while trading is halted.
Correct me if i am mistaken, that these kinds of conduct doesn't seem fair to those who have been investing since inception, and to those also who have selected and invested recently seeing value when not many have. To me, this seems to give insiders an advantage to dump shares when they are high, then get shares handed to them for free.

I have been looking into some under valued businesses, that have potential for healthy growth and strong synergies with other businesses in the space, however, they all seem to favor lucrative payouts to upper-management rather than passing on anything to investors.

Has any one ever seen a business model (in the market for 10+ years) change from non-dividends to paying dividends once their growth and value has become widely realized?

Thank you.

Kind regards,

Py

 

[Value Collector]

I am not sure exactly what the situation is that you are referring to, but when a company raises funds they will often give the new investors a good deal to convince them to contribute funds, and if they are underwriting a retail offer they will get good terms to make up for the risk/service they are taking/providing.

 

[pythagoras]

I am not sure exactly what the situation is that you are referring to, but when a company raises funds they will often give the new investors a good deal to convince them to contribute funds, and if they are underwriting a retail offer they will get good terms to make up for the risk/service they are taking/providing.

Hi Value Collector, although the 'deal' is, on the face of it, quite good, however, for existing 'non institutional' investors for every 7.5 shares held you get an option to purchase 1 share for .36c. Compare this with other classes of investors who get the .36c just for investing.
Then there are fees (by a named bank) for managing the sale of these shares that have to be absorbed somewhere.

As stated i am newbie to investing and researching into and about businesses, there just seems to be divide betwix classes of investors.

 

[Sharkman]

To me, this seems to give insiders an advantage to dump shares when they are high, then get shares handed to them for free.

that sort of thing would be illegal. that's not to say it doesn't happen, it can and does, but whoever does it often winds up getting prosecuted by ASIC and thrown in jail. if you already have a decent amount of money, as most people in possession of such information probably would, you would have to be nuts to risk your freedom and lifestyle for a few extra pennies. but people still do it and end up splashed over the news for all the wrong reasons - remember a few years ago there was that guy, the one who married the PR businesswoman, who was caught insider trading and thrown into jail, what was his name again?

if you come into the possession of material, price sensitive, non-public information, you are not allowed make trades based on it, and companies who are privy to such information (such as the underwriter) will have policies in place preventing employees who have access to that information, and anyone associated with them, from being able to trade it.