4 questions lodged at 2025 Mirrabooka hybrid AGM

Q1. How many of our circa 8,000 shareholders participated in the $85m rights issue, how many applied for additional shortfall shares & what was the total amount of applications received, along with the $ breakdown between entitlements & overs. Companies increasingly disclose this sort of data after retail offers but by withholding it, MIR just raises suspicion about the super-sized allocations to associated LICs AFIC & DJW. Sunlight is the best disinfectant so please disclose this data.

Answer: The chair Greg Richards gave little new information. Why couldn't he say: "AFIC was entitled to $4m, they asked for $25m and we gave them $20m based on a policy of applicants being capped at 4 times there entitlement in terms of overs." Watch video of exchange via Twitter, plus these additional comments from CEO Mark Freeman who effectively blamed retail shareholders for not acting rationally and taking up the offer. Indeed, retail shareholders who don't participate in capital raisings are the biggest victims in Australia's anything goes system and that's why PAITREOs or renounceable rights issues are the way to go because non-participants get fairly compensated for their rights through a competitive shortfall auction at the end. Anything else is exploiting known retail investor apathy, or sophisticated players taking advantage of the unsophisticated, to use the preferred investor parlance.

Q2. Who was the third party which provided the advice on the allocation policy for the $85m rights issue and why didn't you publicly announce the precise policy, as most issuers do when scaling back retail applications? Were you embarrassed to disclose that the policy led to huge allocations to two of our largest shareholders and associated LICs, AFIC and DJW, whilst scaling back small independent holders?

Answer: The chair Greg Richards revealed that it was Acacia Partners which gave the advice and CEO Mark Freeman said they've been advising the stable for 15 years. Apart from that no real data was provided and the chair gave a lot of waffle. Watch video of exchange via Twitter, plus these additional comments from CEO Mark Freeman who effectively blamed retail shareholders for not acting rationally and taking up the offer. Indeed, retail shareholders who don't participate in capital raisings are the biggest victims in Australia's anything goes system and that's why PAITREOs or renounceable rights issues are the way to go because non-participants get fairly compensated for their rights. Anything else is exploiting known retail investor apathy, or sophisticated players taking advantage of the unsophisticated.
Q3. The AFIC stable LICs adopt a very rare policy of lodging the annual report and the notice of meeting for the AGM as one PDF document with the ASX each year. This has the effect of burying the NoM, which is an important document in its own right, plus it needlessly reduces the amount of time shareholders have to assess the annual report, which should be released in August with the full year results, as most companies now do. Will you fix this problem by releasing the annual report with the full year results next year, or at least de-couple the NoM from the annual report?

Answer: They undertook to look at this but revealed the results are released in July before the annual report is ready so that an early dividend can be paid. Well why not release the annual report as soon as it is ready and then drop the NoM a bit later, rather than going with this job lot effort on the ASX each year. Watch video of exchange via Twitter.

Q4. As the only director up for election, could Tony Walls comment on why MIR didn't limit the amount of additional shortfall shares investors could apply for in the $85m rights issue, as most companies now do. Was he aware having unlimited overs could lead to associated LICs AFIC & DJW secure around 30% of all shares sold when they started with around 7%. Did he consider rejecting some of these applications, given it effectively diluted non-participating retail holders selling discounted shares to raise cash we didn't need?

Answer: The chair Greg Richards protected Tony from answering this and said he was involved in setting the original policy at the start of the process and the outcome flowed from that, suggesting the billionaire wasn't specifically told in a board meeting "AFIC have bid for $20m worth of stock, how do you think we should treat them?" Watch video of exchange via Twitter.

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How AFIC diluted retail to get $20m worth of cheap Mirrabooka shares

By Stephen Mayne writing in The Intelligent Investor in July 2025


Listed investment companies (LICs) don't usually raise capital in a pro-rata manner, instead preferring to go with Share Purchase Plans (SPPs) to offer individual holders an opportunity to buy $30,000 worth of new shares.

So it came as quite a surprise to see Mirrabooka (MIR) announce a 1-for-7 non-renounceable at $3.06 on June 2 to raise up to $85 million, with an unlimited ability to apply for additional shares left on the table by other shareholders.

The pricing was based on the NTA, which was a 5% discount to the previous close of $3.22.

Mirrabooka's previous capital raising was a standalone SPP in 2022. With few if any institutional holders, LICs don't usually bother with big end of town institutional placements. Mirrabooka embraced excellent disclosure after that SPP, which came following a direct email request to join this best practice list — revealing that 2,069 shareholders ponied up the $42 million raised and that 73% of shareholders didn't bother to participate, even though it was in-the-money.

The latest annual report says on page 49 that Mirrabooka now has 7,869 shareholders. The top 20 on the same page revealed that the 3 largest individual shareholders are all associates, being LIC stablemates AFIC (4.51%) and Djerriwarrh (2.18%) and the former Mirrabooka chair Terry Campbell (1.7%).

Lo and behold, AFIC announced on June 11 that it had moved to 6.86% of Mirrabooka after spending $20m buying 6.534m shares in the capital raising. In other words, the 4.51% largest and associated shareholder snaffled 23.5% of the shares being offered in a capital raising by a company supposedly devoted to serving the interests of retail shareholders.

Assuming it had not added to its public position of 8.73 million shares during the 9 months since the 2024 annual report was published, AFIC was only entitled to 1.247 million new shares and was allocated overs of 5.287 million shares costing $16.17 million. This would assume an allocation policy of more than 4 times the entitlement.

In my case, I owned 21 Mirrabooka shares going into the raise and applied for $30,000 worth of stock but was allocated $5000 worth of shares, which suggests they had a minimum allocation of $5000 for all holders, although this was never disclosed.

Unlike the 2022 SPP disclosure, this time around the outcome announcement was noticeably threadbare, only revealing a 119% application rate in terms of shares ($101.15m chasing $85m) with no breakdown between entitlements and overs. How many of the 7,869 shareholders participated, and what was the breakdown between entitlement applications and overs? The scale back formula for the $16 million refunded was not disclosed, but the outcome announcement said the board strived for a "fair and equitable allocation outcome" by "having regard to the existing shareholding" of applicants. So why did I get a $5000 allocation? Fair and equitable, based strictly on pro-rata, would have been less than $500.

On June 11, AFIC disclosed that 5 of its 6 directors had all participated in the capital raising in full, but none had applied for or been allocated any additional shares above the 1-for-7 pro-rata entitlement, presumably to avoid a Gerry Harvey style controversy when he was forced to sell a disproportionate overs allocation by the ASX in 2018. Here's an extract from my Intelligent Investor column at the time, as the treatment of AFIC is very similar, save for inferior disclosure from Mirrabooka.

At 5.24pm on a Friday afternoon, Harvey Norman executed a classic display of "taking out the trash" when it released this announcement to the ASX under the innocuous headline: "Listing Rule 10.11".

The subject was an issue that readers of this column were well across, namely the Harvey Norman directors all applying for additional shortfall shares from non-participating retail shareholders in a heavily discounted non-renounceable entitlement offer.

We first alerted readers to this dodgy capital raising in the September 3 2018 column and then followed up with a copy of our email to the directors in the October 15 column requesting that all shareholders, regardless of size, be allocated $15,000 worth of shares from the pool of overs.

Gerry was advised that he had a clear conflict of interest applying for additional shares and therefore should come up with a scale back policy which didn't attempt to maximize the profits pocketed by the insider directors using their discretion.

Gerry being Gerry, he decided to do the exact opposite and excluded everyone who held less than 300 shares from the overs allocation and then went pro-rata after that, as is explained in this announcement.

This had the effect of selectively maximizing Gerry's allocation and fell foul of ASX listing rule 10.11 which requires shareholder approval for any selective share sale to insiders, such as directors or in this case the controlling executive chairman.

Given that the 1-for-17 offer at $2.50 offer was so heavily in the money, there was massive demand for shortfall shares with $110.64 million in applications chasing just $7.18 million worth of shortfall stock based on the $2.50 offer price.

It is not clear how much of that $110 million in cash applications came from Gerry and his fellow directors but they were collectively allocated 1.926 million shares for a cost of $4.815 million. This meant the board scooped up 67% of the shortfall and were looking at a collective windfall profit of about $2 million before the corporate plods at the ASX and ASIC came after them.

In what was the equivalent of a $1 million-plus penalty, Harvey Norman revealed on Friday that these 1.926 million windfall shares were to be sold and the net profit gifted to the University of Western Sydney for a scholarship program.

Which brings us to the question of Mirrabooka's disclosure, or lack thereof. I emailed them on June 5, the day of the threadbare outcome announcement, requesting that they "let me know the participation rate and break down between entitlements and overs, particularly given the sensitivities around the board using its discretion to make scale-back decisions which potentially impact associated parties".

It took a full 5 days for company secretary Matthew Rowe to reply with: "Thanks for your e-mail, the contents of which have been noted and passed on to the appropriate persons."

Best practice with capital raising outcome announcements where the board is using their discretion to allocate shortfall shares is to disclose the breakdown between entitlement and overs application and to reveal the precise allocation policy. Mirrabooka did neither, whilst seemingly coming up with huge allocation to its big brother sister company, AFIC. We just don't know what they did with former chairman Terry Campbell or the other associate, Djerriwarrh as both are below the 5% disclosure threshold.

Here are 7 good examples from over the years in terms of capital raising disclosure practice in comparable circumstances, which Mirrabooka should have followed in 2025:

APN News & Media, June 2009: completed 1-for-5 entitlement offer at $1 a share in June 2009 to raise $99 million. The controlling Irish shareholder did not participate. The institutional component was $83 million and the retail component $16 million, which closed fully subscribed and well disclosed, courtesy of $8.8 million in applications and $39.4 million in overs, which were heavily scaled back.

Billabong, 2009: the first disclosed entitlement offer where the "overs" of $42 million exceeded the entitlement applications of $36 million. The retail maximum was $61 million, but the scale-back policy was generous to smaller investors because it accepted for a minimum of 7,500 shares worth $56,250 or 3 times the entitlement. Excellent transparency in the outcome announcement.

Fairfax Media, April 2009: 1-for-1 at 75c with unlimited overs. See best practice retail outcome announcement detailing scale back policy of 50,000 shares or 3 times entitlement and a breakdown of $97.6m in entitlement applications and $50.4m in overs.

PanAust (PNA), 2009: raised $143 million at 28c and had $120m chasing the $69m retail offer and allocated 54% of entitlement in overs. Good detail in outcome announcement and very strong participation with total overs applications exceeding entitlement applications.

Stanmore Resources (SMR), March 2022: 7-for-3 renounceable offer at $1.10 to raise $656m with unlimited overs. The $35m retail component finished short despite being well in the money with underwriter Petra Capital picking up 8.6m shares. Disclosed that 280 holders applied for $23m worth of stock and $4.6m in overs.

Suncorp (SUN), March 2009: non-renounceable entitlement offer at $4.50 with unlimited overs. The retail component was $502 million and they accepted all $56m in overs applications in addition to the $136 million in entitlements. See outcome announcement.

Wesfarmers (WES), March 2009: entitlement offer at $13.50 with unlimited overs but then later imposed a scale-back cap of 1000 shares or 3 times entitlement. Apart from dropping this outcome announced at 7.28pm, at least they spelt out the split of $1.5 billion and $300 million and the allocation policy which led to a $100 million refund, which lifted the shortfall on the $3 billion retail offer to $1.5 billion.

Copyright © 2025 The Mayne Report. All rights reserved

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