Strategy to get exposure to Share Purchase Plans

[DaLong]

Hi all,

there has been a flux of capital raisings, including Share Purchase Plans (SPP) lately. (https://www.maynereport.com/articles/2020/04/03-1240-3652.html)
A feature of the SPP is that one can subscribe for up to $30,000 of shares, often at a material discount, independant of the number of shares owned.

Has anyone been following a strategy to maintain small positions in companies and systematically participate in SPPs to get access to discounted shares and subsequently sell them on the market?

This seems like a great avenue for retail investors to get an edge, but wondering if anyone has actual experience with it. I have participate in a couple of SPPs and it worked well so far.

Regards,
David

 

[Belli]

Why?

You don't know when an SPP will be offered.
You can have small amounts sitting in various holdings potentially doing nothing.
And are you going to sit on up to $30k for each hoping an SPP will happen? Could be a lot of dosh doing zilch for an unknown period.

My view but whatever others do is up to them.

 

[Dona Ferentes]

Also, the $30K is a "Pandemic Special"

The market regulators are expected to help extend corporate Australia's equity raising spree, to help it get through COVID-19 and out the other side. The ASX has kicked off discussions with the corporate regulator and market participants to see whether it should extend temporary changes to its tightly guarded Listing Rules, which make it easier and quicker for listed companies to raise funds. While no decision has been made, the ASX is expected to extend the Listing Rules relief well beyond the original July 31 deadline and into late 2020....

The ASX lifted placement capacity to 25 per cent of shares on issue from 15 per cent, and removed the cap on non-renounceable rights issues. These limits, and SPP retreating to $15K, may well be gone soon.

https://www.afr.com/street-talk/hope-for-hopeless-as-equity-raising-rules-change-20200401-p54fvr

 

[Dona Ferentes]

That said, I have taken advantage of those on offer. It is a short dated put option, in a way.
But oversubscription from punters and significant scaling back has been endemic. For me, some have been winners while others bounce along around the offer price.

 

[Sharkman]

A feature of the SPP is that one can subscribe for up to $30,000 of shares, often at a material discount, independant of the number of shares owned.

you can subscribe for $30K of shares, sure. doesn't mean you'll get them all. here's an example of what happened with a recent prominent SPP: https://www.aussiestockforums.com/threads/nab-national-australia-bank.1093/page-33#post-1075394

if you do get the full allotment with only a small holding, that's a possible sign that investor demand wasn't really there to begin with. if investors are assumed to be acting in self interest and most of them stayed clear, is it something you really want to be subscribing to? did you see something in its prospects that everybody else missed?

 

[So_Cynical]

I seem to remember that Stephen Mayne used to have a portfolio strategy that maintained a very small share holding in many many stocks so he could go to all the AGM's
also turned out to be a thing back in the GFC as like now there were many many capital raisings done at a steep discount, if you are in for the long haul it's a valid long term
strategy.

Owning 600 bucks worth of every ASX300 stock would require 180K, cost about 4k and basically track the index and yield maybe 3% in dividends, assuming you could make
5 or 6% on discounted cap raisings, bonus issues and spin outs etc, could/would be a conservative little earner.

 

[Value Collector]

I seem to remember that Stephen Mayne used to have a portfolio strategy that maintained a very small share holding in many many stocks so he could go to all the AGM's
also turned out to be a thing back in the GFC as like now there were many many capital raisings done at a steep discount, if you are in for the long haul it's a valid long term
strategy.

Owning 600 bucks worth of every ASX300 stock would require 180K, cost about 4k and basically track the index and yield maybe 3% in dividends, assuming you could make
5 or 6% on discounted cap raisings, bonus issues and spin outs etc, could/would be a conservative little earner.

sounds like a nightmare to manage and do the tax return on though, I think I would prefer just to own the index.

 

[dyna]

SPP's have been profitable for me,so far.Mums and dads don't seem to take full advantage of them,though.The recent DOW renounceable rights issue only got 51% taken up by the small punters.Meanwhile,Instos fell over themselves bidding for the left-overs.Whether it's a straight rights issue or an SPP,the trick is to read the finance press when it reports on the initial reaction of the major shareholders,to the raising.They have the whole game stitched up early on,anyway...Follow the (big) money,as they say..

 

[Dona Ferentes]

https://www.aussiestockforums.com/threads/thought-bubble.35456/

Went through the same thought process myself. The winners came from outside the ASX300, mainly. There's 2000+ listed entities

 

[DaLong]

https://www.aussiestockforums.com/threads/thought-bubble.35456/

Went through the same thought process myself. The winners came from outside the ASX300, mainly. There's 2000+ listed entities

Thanks for the link. That conversation went a little off-topic very fast, but it is exactly what my thoughts were.

You are making a good point that many of the capital raisings will come from outside ASX200 / 300 companies, which won't have as much access to other sources of funding, possibly still growing quicker and having less cashflows. That will make this exercise quickly go out of hand if you want to have a good coverage of possible cap raising candidates.

There seems be simply money left on the table if not all retail holders participate one can oversubscribe to these cap raisings. Unfortunately, i haven't so far found a good database which keeps track of all scale back ratios etc.

Also, any experience with scale back of chess-sponsered holdings vs central custodian holdings (e.g. as with Interactive brokers) ?

 

[DaLong]

you can subscribe for $30K of shares, sure. doesn't mean you'll get them all. here's an example of what happened with a recent prominent SPP: https://www.aussiestockforums.com/threads/nab-national-australia-bank.1093/page-33#post-1075394

if you do get the full allotment with only a small holding, that's a possible sign that investor demand wasn't really there to begin with. if investors are assumed to be acting in self interest and most of them stayed clear, is it something you really want to be subscribing to? did you see something in its prospects that everybody else missed?

If the stock is trading at x and i have an opportunity to buy at a 10% discount to that, this seem like money left on the table. I simply assume there will be many retail investors out there who make the assessment based on non-economic considerations and/or don't have $30k sitting around to participate.

 

[BoNeZ]

OnMarket are offering a new scheme where they will buy 1 share in every ASX300 company in your name making you eligible for any SPP that comes along. They will then apply for the SPP in your name and immediately sell any shares you receive to lock in any profit or loss. They also provide appropriate year end paperwork for your tax return.

I've received a couple of emails about this because I'm on a mailing list but I'm not participating. I want my money working hard and would rather invest my money in the market today than lock it away hoping to participate in any SPP that might come along.

As always DYOR.

 

[mjim]

OnMarket are offering a new scheme where they will buy 1 share in every ASX300 company in your name making you eligible for any SPP that comes along. They will then apply for the SPP in your name and immediately sell any shares you receive to lock in any profit or loss. They also provide appropriate year end paperwork for your tax return.

I've received a couple of emails about this because I'm on a mailing list but I'm not participating. I want my money working hard and would rather invest my money in the market today than lock it away hoping to participate in any SPP that might come along.

As always DYOR.

I just posted about the same.... do you agree withe risks I mentioned

 

[BoNeZ]

I just posted about the same.... do you agree withe risks I mentioned

Investing in SSP's can be profitable and I'm sure the harvester product will appeal to some investors but I'm not one of them.

The fees are high but it's a complex product and probably very hands and time consuming onto manage.

Increasing the shares outstanding will dilute and lower their value and not everyone who participates in a SPP plans to sell as soon as possible. For most companies I doubt the increased volume would have a sizable impact on the share price.