So Auscann (AC8.ASX) has finally released the details of their share purchase plan (SPP) and retail have been shafted, yet again.
Here are the main points:
- AUD $1.05 issue price
- 15K max buy-in. No brokerage or commish.
- Scale back likely if more than $8 million raised. (probably in the bag – see point below.)
- Not underwritten – the directors reserve the right to place any shortfall to professional and sophisticated investors. – Nice! At least they won’t have egg on their face when retail shy away from paying above market.
- For the avoidance of doubt, there are no attaching options under the SPP (sic)
Who writes this shit? Serious Winthorpe language, right there.
No surprise retail miss out on the options. We told you so, when we covered the cap raising last week.
If you read between the lines, the terms of the initial placement were likely dictated to AusCann, including the attachment of the options.
AusCann says: 5 cent discount. Market says: F you!
The company says that’s why (SPP discounted to placement in lieu of no options) they’re generously giving the unwashed a 5 cent discount to what the top end of town paid ($1.10).
Gee – thanks!
Hang on – the shares closed yesterday at $1.04
The parallels with the capital raising undertaken by Creso Pharma in late 2017 are now becoming eerie
Both raised capital at $1.10, watched their stock price fall below that level and then asked retail to pay above market for new shares.
Not to mention the record date for eligibility in the AC8 SPP was Friday 13th July.
Creso shares closed yesterday at 62 cents. AC8 shareholders will surely be hoping to avoid a similar nightmare.
Expect continued selling pressure in the coming weeks
The SPP is set to close on Thursday 2nd August, 2018.
Until then, shenanigans will likely play out when arbitrage opportunities present themselves.
One such example is known as selling the heads and works like this:
When you receive stock with attached options, you can sell the underlying (stock) when it is at or near the issue price, and keep upside exposure to the share price via the options, which have cost you very little, if anything. In doing so, you significantly reduce your downside risk should the stock continue to fall.
Sometimes the best course of action is to just buy on-market at a price you’re happy with and shut out all the noise.
That’s our suggestion as to how you play this one.
Your ASX commentator,
–// Craig Amos
FULL DISCLOSURE: AusCann are not an Equity Guru marketing client.