Needless placement approval resolutions

January 5, 2022

Why did all these companies seek placement approval from shareholders when they were operating well within the 15% annual limit on selective share issues?

It's one thing to go ahead and do a discounted placement as a one-off, but these selective deals are becoming so entrenched that companies are routinely seeking shareholder approval at AGMs to maximise their ability to do it again.

If shareholders believe in equitable treatment through PAITREOs, then they should vote against every placement refresh resolution.

Take IOOF as an example. The notice of meeting for the November 23 AGM came out this week and the directors want shareholders to retrospectively approve the $461 million placement.

This means IOOF will have the capacity to go out and do another $500 million selective placement on November 24, if the directors so choose. Here are some other examples of companies seeking placement shareholder approval retrospectively this AGM season, rather than living within the rule that you can only selectively place 15% of your issued capital in any 12 month period:

Challenger Financial Services: received approval from shareholders at today's AGM for a $460 million note issue and a $500 million placement of ordinary shares at $13.06. If they wanted to issue more selective new equity, why not seek approval at the time rather than getting a blank cheque in advance?

Ingenia Communities: raised $32 million in an institutional placement at $2.60 in May and seeking shareholder approval at the November 14 AGM. Is it really planning another placement in the next 6 months?

Redflex Holdings: This company is even just refreshing its placement capacity after issuing 7.6 million performance rights options to executives. Why bother?

RCR Tomlinson: refreshing its capacity after a $75 million institutional placement at $3.55 in August. Can't they just wait until next August before doing another dilutive placement?

Collins Foods: raised $54 million in a placement in March and can't even wait another 5 months for the placement capacity to return to 15%.

Interestingly, anyone who receives shares in a placement is not meant to vote on the resolution approving it. But based on the relatively large turnout which you see in these resolutions, I doubt this conflict of interest rules has been strictly enforced over the years, but that's a story for another day.

That's all for now.