How two-tiered capital raising hurt retail investors

Westfield: did a $3 billion 2-for-23 rights issues at $19.50 a share in June 2007. The entitlement offer was non-renounceable but both retail and institutional shareholders were promised a premium from the sale of shares not taken up. The retail take up was 15.7 million shares and the surplus of 22.9 million were sold into a bookbuild at $19.50, with no premium. The institutional bookbuild fetched $19.60, so instos collected 10c compensation for not participating.

Primary Healthcare: did a $1.231 billion entitlement offer at $5.40 in early 2008 which raised $958 million from institutions and was about 80% subscribed. The shortfall generated a premium of $1.20 per share. Retail only invested $70 million and non-participants only collected 10c per share as the broader market was weakening.

Alumina: raised $910 million through a renounceable 5-for-19 offer at $3 a share in September 2008 which saw retail investors who didn't participate receive a 35c premium courtesy of the institutional bookbuild. This was less than the 70c paid to the 8% of institutional holders who declined the offer.

Wesfarmers: $2.9 billion entitlement offer at $29 in 2008. Institutions took up 96% and the shortfall attracted a premium of $8.25 from the bookbuild. Retail investors received a premium of $9.75 from the bookbuild. A rare win for retail!

FKP: a $324 million renounceable offer in 2009 at 40c. The $204 million institutional component was 97% subscribed and the shortfall clearing price was 46c a share, giving the non-subscribing institutions 6c a share. The $120 million retail offer was only 46% subscribed but the 162 million share shortfall generated no compensation in the retail bookbuild conducted a few weeks later.

Orica: a $900 million 1-for-8 entitlement offer at $22.50 in mid-2008. Institutions took up 70% of their entitlement and non-participants received 25c in the bookbuild. Retail investors only took up just over half of their entitlement, leaving a shortfall of 6.3m shares which attracted a 10c premium in the retail bookbuild.

Connect East: 1-for-2 entitlement offer in August 2009. Institutional component 87% subscribed and whilst the institutions received 3.5c a unit, the retail investors received only 0.5c a unit.

Sigma Pharmaceutical: did a 1-for-3 at $1.02 in September 2009. The institutional shortfall went off at $1.07, giving the institutions that did not subscribe a payment of 5c a share. The retail bookbuild went off at the issue price, leaving nothing for the holders that did not take up their entitlements.

ALE Property Group: entitlement offer in 2009. The $64 million institutional component attracted a 50c premium for non-participants and retail received 41c, but this was unusual because retail could also apply for overs.

Rio Tinto: everyone renounced, institutions and retail on the same terms, although it was slightly different for UK and Australian shareholders.

Lend Lease: launched a 5-for-22 offer at $7.70 in 2010 to raise $806 million. Was most unusual with a combined book build of 28.2m shares which sold at $8.60, given non-participants 90c in compensation.

ALS Ltd: the old Campbell Bros raised $246m at $7.80 a share in 2013. The $112 million institutional component was 92% taken up and non-participants received 95c for their rights. The retail shortfall was 3.89m shares and each attracted a value of 95c in the bookbuild.

ASX Ltd: conducted a $553 million entitlement offer in 2013. Institutions received $3.70 in compensation, whereas retail investors only received $3.40.

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