Australian (ASX) Stock Market Forum

Share Purchase Plan Trading

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Has anybody explored this offering being marketed it is called Share Purchase Plan Harvester (SPP Harvester)
Idea is
1) You purchase 1 share each of selected 300 ASX listed companies
2) If and when any of company announces a SPP you get to participate, idea is there will be a discount, you then participate ( up to 30K per shareholder) and HOPE to sell the shares after they start trading at some profit ( Equal or above the SPP discount)

Obviously there are risks involved the main one being
- The Discount might disappear and when all the SPP participants start selling if you are not on the top of the Que you can
Costs:
- $3000 as brokerage to get the 300 shares ( they use Interactive Brokers)
- Initial Capital for 300 shares is approx $3500
Fees:
The mob will charge 20% performance fee ( profit calculated after deducting the $3000 brokerage paid)
there is some other 1.28% cost ( I can't pin point it in teh pDS but it is there)
The mob offering this has AFSL

In Recent mailing list they mentioned these two live examples!
9th spt
NEA,
Closing price 2.89 SPP price 2.77
TOday price = approx 2.28

9th spt
CLW,
Closing price 5.03 SPP price 4.789
TOday price = approx 5.08

AND is there something similar available in USA?
 
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One of the hurdles to implement this is the admin component and these guys can take care of it. But i just looks like an expensive proposation both with a 1.3% fee and a 20% performance fee.
For that sort of fee i would at least like to see that they screen out companies with recent capital raisings and buy stocks outside the ASX300 which have a high likelihood of raising capital in the near future.

The other risk is, and this depend on how this is structured in terms of beneficial holders, that the bookrunner will identify these acounts as prone to 'flipping' stock and aim to allocate fewer stocks.

I believe the SPP structure is fairly unique and the US uses a lot more rights issues to raise capital. The only reason with the SPPs are so attractive is that you can oversubscribe by a large factor relative to your holdings. A rights issue is a 'fairer' mechanism as everyone gets a pro-rata allocation.
 

Dona Ferentes

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why would you invest in something you didn't have the conviction to hold, just because it "appears cheap"?

This method appears rather spurious (not even thinking about the fees) in that there is no mechanism to derisk, if things go wrong. Capital is tied up for a few weeks but if circumstances change, you can't get money off the table by selling existing shares because you don't hold any.

Not for me
 
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yes I agree with both risks mentioned
Lets see how this mob performs over a year ( assuming they do disclose all the wins and losses)
 

MovingAverage

Smoke me a kipper
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Has anybody explored this offering being marketed it is called Share Purchase Plan Harvester (SPP Harvester)
Idea is
2) If and when any of company announces a SPP you get to participate, idea is there will be a discount, you then participate ( up to 30K per shareholder) and HOPE to sell the shares after they start trading at some profit ( Equal or above the SPP discount)
Another obvious drawback is that a lot of SPPs are only pro-rata entitlements. That is for example, you can only buy 3 new shares under the SPP for every 1 share you own. Nice if it's a non-pro rata SPP and you can by $10k, $20k, $30k or more, but not so good for pro-rata SPPs
 

Dona Ferentes

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Another obvious drawback is that a lot of SPPs are only pro-rata entitlements. That is for example, you can only buy 3 new shares under the SPP for every 1 share you own. Nice if it's a non-pro rata SPP and you can by $10k, $20k, $30k or more, but not so good for pro-rata SPPs
Pro rata is entitlement issue. SPP is up to $30k, no matter how many or few held.
 

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