Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.
Hi guys Srg are doing a capital raise at $0.83 /share and they are currently are trading at $1.07. They are offering up to apply for $30000 worth this likely to be oversubscribed and you will probably only get a small parcel of shares From your experience of capital raises like this and i know its only a guess do you think there is any chance of getting anywhere near the maximum allocation Thanks Tony
Hi Tony.
We’ve discussed SRG in late August for subscribers who missed it; we are a fan of the business holding the stock in our Emerging Companies Portfolio. The institutional placement was scaled back by ~60%, and that raised $60m. The SPP is set to raise $6m and we doubt they will upscale that amount – they don’t need the cash, and they won’t want to dilute further at such a big discount. They also need to stay under the cap of issuing no more than 15% of the register. Based on $66m, as it stands, they are at about 13.5% new issuance, so don’t have much room.
In a case like this, what generally happens is they’ll pro-rata the allocations based on existing holdings. For instance, someone with 100k of stock will likely get 13.5k of new shares to avoid dilution, whereas someone with 10k of stock will get 1.3k of new shares, assuming a bid is submitted for at least that amount. It’s the fair way of doing it, though, they do have discretion on the allocation policy.
Disclosure: Wholesale clients of James Gerrish participated in the Institutional Placement via Shaw and Partners. Shaw is a shareholder of Market Matters.
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