When you own Australia’s biggest small portfolio of shares, one thing you quickly notice is the companies which offer share purchase plans (SPPs) that allow all shareholders, regardless of size, to buy up to $5000 worth of stock in a company.

For instance, I presently own just one stapled security in Macquarie Communications Infrastructure Group (MCG), which is currently conducting an SPP. Despite being their smallest investor, they’ve still banked my $5000 cheque and I’m hoping to sell most of the 819 new securities for a profit of about $200 when the shares are allocated at $6.10 a pop later this week.

MCG has made the offer to its small shareholders because it did a $625 million institutional placement at $6.10-a-share a few weeks back to fund its two huge acquistions in the UK.

Unfortunately, not all companies are so conscious of their retail investor base. Shares in Asciano Group, the de-merged infrastructure arm of Toll Holdings, are today up another 23c to $11.38, so investors who participated in last week’s $150 million placement at $10.65 are already enjoying a tidy 7% profit.

This includes largest shareholder and CEO Mark Rowsthorn who wrote out a cheque for $50 million to prove his commitment to the demerged company. Many of Asciano’s small shareholders would love to have been offered the same terms – and should have been. Instead, only the hand-picked big boys have benefitted.

Several other companies have recently done institutional placements and ignored their small shareholders by not offering a share purchase plan. These include QBE Insurance, ABC Learning, Gunns and Transpacific Industries.

SPPs are not exactly equitable as they disproportionately benefit the smallest shareholders like me, but placement without SPPs are just as bad. The fairest way to raise capital is through a pro-rata rights issue which is what Frank Lowy’s Westfield group did last week.

Fortescue Metals will be another interesting stock to watch as its shares surged today after announcing that Citigroup and JP Morgan had been appointed to try and raise $US1 billion. Let’s hope the small shareholders are allowed access to any equity raising on the same terms rumoured to have been offered to the likes of James Packer.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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