Non-renounceable offers where overs were completely banned

July 20, 2022

This list tracks the bad boy issuers which did non-renounceable entitlement offer raising more than $20m where retail investors were banned from applying for additional shares, leaving the shortfall exclusively for under-writers.

Arafura Resources (ARU) 2019: 7-for-20 at 8.5c to raise $23.2m with no overs and Noble Group cornerstone under-writing for first $7.2m. Only raised $8.1m with rest coming from under-writers.

Australian Finance Group (AFG), 2020: $60 million raising comprising a $15 million placement at a 17.3% discount of $1.15 followed by a non-renounceable 1-for-5.5 at $1.15 with certain insiders partially under-writing the retail offer. Retail can't apply for overs which is a bad thing, particularly with insiders under-writing the guaranteed shortfall. The retail offer was 78% subscribed with $10.1 million raised and an additional $2.96 million coming from the under-writers. With the shares at $1.70 when the retail outcome was announced, this ended up being heavily dilutive for retail investors when combining the impact of the placement, the size of the discount and the retail shortfall.

BCI Minerals (BCI), 2020: 1-for-2 non-renounceable offer at 24c to raise $48 million with largest shareholder Kerry Stokes taking up his full allotment. The institutional component raised $20.8 million but the $27.2 million retail only attracted $5.5 million, leaving a $20.6 million shortfall with the under-writers. There were no overs, suggesting the under-writers were quite happy to pick up the stock. Stock finished the year at 30c so a 25% return for participants. (CAR), 2022: launched a $1.207 billion non-renounceable 1-for-4.16 at $17.75, a 14.5% discount to the previous close of $20.76, to fund the full acquisition of US business Trader Interactive. No overs for the 20,000 retail investors so this is a serious regression from the $600m PAITREO it launched last year. There was a 90% take up of the $842 million insto component with the shortfall going to the under-writers. The $365m retail offer followed and finished short.

Downer EDI (DOW), 2020: $400 million 1-for-5.58 non-renounceable entitlement offer at $3.75, a 12% discount to the previous close of $4.26. The $339 million institutional component was supported by 97% of holders but shortfall was given away at the offer price. The $61 million retail offer had no overs and unsurprisingly fell 49% short with the $30 million shortfall being handed away to institutional sub-underwriters. Retail investors started off owning just 15.25% of the company and were diluted by the $30 million shortfall because they were banned from applying for additional shares in an in-the-money offer. A month later the stock at $4.23 so this was serious dilution. Stock finished the year at $5.33 so the retail shortfall has been very costly.

Emeco Holdings (EHL), 2020: $149 million 1-for-2.1 non-renounceable at 85c, an 18% discount to the previous close of $1.035. There was a 94% take-up of the $111 million institutional component. Retail were banned from applying for additional shares and the $38 million retail offer only attracted $6.5 million in applications so under-writers picked up $31.5m shortfall. Stock finished the year at $1.14 so participants well in front. 4/10.

Flexigroup, now called Humm (HUM), 2020: $140 million 1-for-3.2 accelerated non-renounceable entitlement offer at $1.14, a 12.6% discount to the previous close of $1.305. Retail were banned from applying for overs so there was guaranteed dilution. The institutional component raised $79 million with strong participation but the $61 million retail offer was poorly supported only attracting $3 million in applications given the stock was hovering around $1. The retail offer was 50% under-written by Citi so the company said it received $36 million from the retail offer with $33 million of this coming institutional under-writers. Founder Andrew Abercrombie took up 25% of his entitlement and wasn't compensated for the dilution.

MMA Offshore (MMA), 2017:
1-for-1 non-renounceable at 20c to raise $98 million, with retail component comprising $56m. 2 million insto shortfall shares were auctioned off at 24c but 191.5 m retail shortfall shares worth $38.3m were just gifted to the underwriters. See outcome announcement.

Oohmedia (OML), 2020: emergency $167 million raising comprising a $39 million placement at 53c, plus a 1-for-1 entitlement offer for existing shareholders at the same price with no overs. The stock had last traded at 84c before the offer was launched. The accelerated component of the institutional entitlement offer was supported by 91% of institutional shares and raised $117 million. The $14m retail component finished 27% short with $4 million worth of stock going to the under-writers.

Southern Cross Media (SXL), 2020: $169m raising at 9c comprising a $47 million placement and a $121 million non-renounceable entitlement offer with no overs. The placement comprised a ridiculous 68% of the pre-raising shares. Institutions took up 92% of their entitlements to the $102 million entitlement offer. The $20 million retail offer finished 34% short with the $6.8 million shortfall going to the under-writers. See outcome announcement.

Super Retail Group (SUL), 2020: $203 million non-renounceable entitlement offer at $7.19, an 8% discount to the previous close of $7.81. Founder Reg Rowe agreed to take up his full $59.2 million entitlement (29.1%) and therefore won't be diluted. The $158 million institutional component (including Reg Rowe) was 95% subscribed with no disclosure on who got the $8 million shortfall. The failure to allow 10,000 retail shareholders to apply for additional shares in the $45 million retail offer, despite a specific written request to do so, has guaranteed a retail shortfall. Macquarie and UBS were the joint managers and under-writers, taking a fee of $2.05%, excluding the Reg Rowe component.

Worley Parson (WOR), 2017: 1-for-10 at $13 to raise $322m with no overs. $69m retail offer was 50% supported with good disclosure of the 4,705 applications. UBS under-wrote the lot. See outcome announcement.