Leaving 1 share behind - eligible for SPP?

[El Tigre]

So Share Purchase Plan's - Company capital rasining offering shares to all shareholders at a discounted price to a maximum normally of $15,000.

As the discounted rate is normally pretty good, When your trading shares should you allways "leave one behind" in your portfolio? - thus gaining eligibility for SPP.

i.e first time buying a certain stock - Buy 10,000 BSL - Sell 9,999 BSL, leaving 1 in your portfolio.

If you do this for every stock you purchase and sell (first time only), your portfolio will have a single share in many Company's. Any of them undertake a SPP that you fancy, then your in.

#1 question - any reason why this wouldn't work?
#2 question - do people actualy do this?

 

[robz7777]

Re: Leaving 1 share behind - eligable for SPP.

Can't see any reason for this not working other than:

An issue on a share for share basis.. ie 10 for 1, if you hold 1 share you can apply for 10 more at the special price..

 

[pixel]

Re: Leaving 1 share behind - eligable for SPP.

So Share Purchase Plan's - Company capital rasining offering shares to all shareholders at a discounted price to a maximum normally of $15,000.

As the discounted rate is normally pretty good, When your trading shares should you allways "leave one behind" in your portfolio? - thus gaining eligibility for SPP.

i.e first time buying a certain stock - Buy 10,000 BSL - Sell 9,999 BSL, leaving 1 in your portfolio.

If you do this for every stock you purchase and sell (first time only), your portfolio will have a single share in many Company's. Any of them undertake a SPP that you fancy, then your in.

#1 question - any reason why this wouldn't work?
#2 question - do people actualy do this?

sometimes it may work; but if the spp is really attractive and oversubscribed, it's in the directors' discretion how they scale applications back. So all those "unmarketable parcels" may be recognised for what they are - and miss out.

Have I done it? Not exactly in that way; but I have on occasion sold the majority of my holdings to free up the cash I'd need for the spp; assuming of course that I could sell them above the spp offer price

 

[skc]

Re: Leaving 1 share behind - eligable for SPP.

So Share Purchase Plan's - Company capital rasining offering shares to all shareholders at a discounted price to a maximum normally of $15,000.

As the discounted rate is normally pretty good, When your trading shares should you allways "leave one behind" in your portfolio? - thus gaining eligibility for SPP.

i.e first time buying a certain stock - Buy 10,000 BSL - Sell 9,999 BSL, leaving 1 in your portfolio.

If you do this for every stock you purchase and sell (first time only), your portfolio will have a single share in many Company's. Any of them undertake a SPP that you fancy, then your in.

#1 question - any reason why this wouldn't work?
#2 question - do people actualy do this?

Yes holding one share should entitle you to particpate in SPP most of the time. However, your profits will be moderated by several factors.

1. The company may or may not need to raise additional capital.
2. The company may or may not raise capital via a SPP - placements and rights issue are more common.
3. The SPP issue price may or may not be sufficiently below market price.
4. The share price may or may not remain above SPP price when the shares are issued. There's always a window of risk between you sending the money and the new shares arrive at your account.
5. You need to have capital available to participate in the SPP.

I don't know what your average hit rate would be, but I don't think it will be better than 2-3% (i.e. 2 or 3 successful SPP play per 100 companies held). Also, you better make sure all investor communications are done in electronic format or you will be inundated with paper work.

I have a similar strategy but I only target companies that have potential need to raise capital (e.g. It's unlikely that the Big4 bank would need to raise capital within 12 months) and I take slightly larger parcels so I can also participate meaningfully in any rights issue.

EDIT - 6. Risk of scaleback as Pixel the Cat said.

 

[El Tigre]

Re: Leaving 1 share behind - eligable for SPP.

Yeah for anything offered at a ratio (rights issue etc) it is useless.

 

[El Tigre]

Re: Leaving 1 share behind - eligable for SPP.

Thanks SK and pixel. Good poitns.

I mainly had smaller companies in mind (not paying dividends etc) otherwise it would be messy. Currently 2/5 Speculation/low cap stocks I'm holding have had a SPP this Financial year, both appealed.

I know hit rate would be much lower but it's no difference to me having a 10c share sit in my portfolio for years.

 

[robz7777]

Re: Leaving 1 share behind - eligable for SPP.

I know hit rate would be much lower but it's no difference to me having a 10c share sit in my portfolio for years.

Currently holding about $50 worth of DTE for that reason!!

 

[So_Cynical]

Stephan Mayne has been doing this for awhile now...lots of info and numbers on his site.

http://www.maynereport.com/articles/2009/06/14-1500-4361.html

 

[skc]

Stephan Mayne has been doing this for awhile now...lots of info and numbers on his site.

http://www.maynereport.com/articles/2009/06/14-1500-4361.html

Rarely do companies raise money these days allowing over subscriptions.

 

[El Tigre]

Stephan Mayne has been doing this for awhile now...lots of info and numbers on his site.

http://www.maynereport.com/articles/2009/06/14-1500-4361.html

Thanks Cynical, helps a lot.