Share Purchase Plans (SPP)?

[youngone]

Hi guys.

What is SPP in simple terms for us beginners. is that a good thing? How does it work and how can we use it to our advantage. (Nokia used SPP strategy along other method to push himself from $1500 to $3000 in 8 months.)

Thanks

 

[KurwaJegoMac]

Re: SPP

Hi Youngone,

Have a read of this:

http://www.intelligentinvestor.com....f-share-purchase-plans.cfm?articleID=10000630

Should give you a good foundation of what's involved in a SPP as well as highlighting some of the risks and rewards involved.

 

[Bill M]

Re: SPP

Excellent article from KurwaJegoMac, for me I only buy if it is in my favour. I wait until the day before you have to pay and if the SPP turns out cheaper than what I can buy it on market then I take it up. If they have a fixed price for the SPP and the market has deteriorated substantially since the offer came out I do not go anywhere near them. No use saving $20 on brokerage if it's going to cost you a few hundred dollars more, good luck.

 

[kingcarmleo]

Only been involved in one SPP and I'm down a lot of money because of it

 

[pixel]

Re: SPP

Excellent article from KurwaJegoMac, for me I only buy if it is in my favour. I wait until the day before you have to pay and if the SPP turns out cheaper than what I can buy it on market then I take it up. If they have a fixed price for the SPP and the market has deteriorated substantially since the offer came out I do not go anywhere near them. No use saving $20 on brokerage if it's going to cost you a few hundred dollars more, good luck.

That sums it up, Bill:
If you have done your homework and find the share is worth owning at the price, it's a no-brainer. If you regret ever getting involved with it, why waste good money after bad?

If I hold a company that offers me the opportunity to top up at a discount, I also consider this strategy:
Do I hold "enough" shares already? If so, why not sell some or all, knowing that I can buy this many back at a fixed price.

Good example recently was RDR. I was given the oportunity to buy up to $15,000 worth at 58c, but my position sizing for this particular stock was only $20K, So I sold three quarters of my holdings at 64.5c - that was all I could get at the time. Then I watched how it performed - and made my decision at the last moment, BPaying a day before Close. If you look at the chart, you'll know whether I'm smiling or not.

Earlier this year, I had the opportunity to buy ARW in another spp for 1c; in that case, I even received some free options in the bargain. That, too, was one I took up in full: If you add the current prices of ARW and ARWO, you'll again know that 1c was a reasonable purchase.

I won't claim that all shares that offer me an SPP are like that, but as I'm rather inclined to get rid of dogs before they desperately need more money to survive, I tend to fare quite well with SPPs.

 

[Dona Ferentes]

Search SPP and a whole range of threads come up. This one seems the most sensible.

In the old days, the early 2000's, SPPs weren't necessarily tied to other capital raising initiatives. With the maximum at $2,500, then $5K, companies could run a SPP and pick up some cash. No-one got too much of an allocation, things were peaceful. Then by the GFC, the top amount went to $10K and quickly to $15,000. This is serious money for many, and uptake became polarising if the discount was sufficient. Applications began getting scaled back. Strategies like just holding a few became more common, as in SPPHarvester and the like.

More recently, when the 10 year 'sunset clause' was due to be remade, at Oct 2019, the limit increased to $30,000, initially for 12 months then ASIC extended it during the the Covid downturn, when corporates thought to bolster balance sheets. So it sits at $30K.

With the opportunity to top up at a discount (usually), I find it a good way to invest if I can see the money going to benefit the company - growth, an accretive acquisition (sometimes to lower debt). However, of the 10 or so I have participated in, only three have allowed the full application. MIR was one, AR9 also and spectacular for me , and the third, EOL, was limited to $11K.

Currently, 4DX, PKS and CXL have all scaled me back, usually in the order of 70-80%; expecting DEM, closed early, to do similar.

It is annoying, as the directors have discretion as to how and it becomes a guessing game. Another aspect is the release of information is patchy and poorly conveyed. I have first learned of allocations by noticing the share increase on broker site.

And to tie up $120K with uncertain outcome is tricky. And the other warning for players; with early stage companies, probably not paying dividends, if the registry doesn't have details, then money comes as a cheque, by snail mail. The catch is that details have to be lodged before the SPP closes (but this isn't mentioned ealier)

[for CXL], holders with EFT details recorded will be paid today and should receive funds on April 14, 2021. Those without EFT details will be sent a cheque, which may take several days to process and send.

 

[peter2]

re the current OPL spp.
The company's share registry (Automic) mailed the coded documents late and they were received less than 48 hrs before closure.
Not good enough Automic.

 

[Craton]

re the current OPL spp.
The company's share registry (Automic) mailed the coded documents late and they were received less than 48 hrs before closure.
Not good enough Automic.

Too right Peter and it's not the first time I've heard and/or experienced the same from these cowboys. From memory I've even had one arrive two days after the offer closed.

Way back when MYOB s/ware owners were offered the prospectus for the taking up on the MYOB IPO, we received the doco's two weeks after MYOB floated!
Perhaps we missed the email/letter advising of said IPO but none were ever found. I just put it down to the *cough* joys of living in a remote area with (back then) dodgy dial up and both email and snail mail going missing...

Back to SPP. DYOR is absolutely the best advice on SPP.
From my POV, it certainly is a good way to top up a holding without any additional trading fees.

 

[Dona Ferentes]

re the current OPL SPP. The company's share registry (Automic) mailed the coded documents late and they were received less than 48 hrs before closure.

It has frequently been the case that retail investors are second class, afterthoughts. Especially, now that accelerated placements (+ SPP) have usurped more complex but fairer rights (pro rata entitlement) capital raisings that were the norm a while ago. I have always tried to get electronic notification, since sweating on documentation in the past. But, as many posters confirm, the different Registries are difficult at best, awkward, different from each other. I understand the privacy and protection of information issues but, my oh my.... Not easy.

Back to SPP. DYOR is absolutely the best advice on SPP.

Every time; absolutely. Each offer is different. In impact of the offer on the company, the reason to raise, the dilution, and the small print. Familiarise yourself with the details.

From my POV, it certainly is a good way to top up a holding without any additional trading fees.

And on that, I agree. ... Maybe all boats lift with a rising tide, but generally new shares are at a discount. The delay from Insitutional Placement to SPP gives a grace period, to see how the market reacts to new capital. (and sentiment can change). One nice feature is that there is often, in times of uncertainty, a VWAP price rest if the price tanks below the offer. Not perfect, but useful.

 

[Belli]

From my POV, it certainly is a good way to top up a holding without any additional trading fees.

For the LICs I hold, they don't happen very often now. The last one by ARG was in 2018 and before then there were quite a number between 2003 to 2017.

The ones I have participated in lately were ALI, WHF (December last year) and MIR. MIR was close to reaching the announced cap where applications would have been scaled back. It seems AFI was diluted with it too as it announced it was no longer a substantial holder in MIR as a result. From what I heard, MIR could have raised more (if all shareholders applied to the max it would have raised about $200m) but the cap was decided upon by the Board on advice from the investment team. And they didn't want too much cash as it would have been a drag plus a bit difficult to place within the mandate guidelines.