My Discounted Capital Raising Process: A Notebook

As readers will be aware, one of my strategies at the moment is to buy tiny holdings of shares in a lot of different companies, in the hopes of being able to participate in discounted capital raisings. You can read about the strategy here. And supporters can see the first 10 stocks I bought for this strategy here. And the second 10 stocks here.

For my own sake, I just wanted to start a little bit of a notebook with my process, as well as my dates that I need to action things by for companies that have since declared a capital raising, that I might be interested in.

  1. Buy a tiny holding in many decent companies that might raise capital.
  2. Hold for a while.
  3. If the company announces a capital raising, sell my shares on the day of the record date (or a day after). This should mean I am entitled to the shares, due to T+2 settlement.
  4. Decide what kind of discount I would want to the prevailing price.
  5. Consider how many shares I’m likely to get under the offer (including applying for shares beyond my entitlement, in the case of an entitlement offer).
  6. On the day before the capital raising closes, or on the very last day assess the prevailing share price against the capital raising price and apply for the maximum shares I think I’m likely to be awarded, if there is a sufficient discount.

So far, two companies on my lists have decided to raise capital. Vista Group (ASX: VGL) and Ramsay Health (ASX: RHC). I have a right to participate in both raisings. I’ll put the key dates here to refer back to.

Vista Group International (ASX: VGL)

Offer closes 3pm, May 5, 2020. Offer is for 1 share for 4.37 I owned at the record date, but I have the right to apply for an additional 40%. That amounts to about 1 share for every 3 I owned. The offer price is a good discount, at about $1 (AUD), relative to the current share price of $1.17. Unfortunately, due to the limited allocation, this won’t be much of a gain for me even in the best case scenario. However, the sweetener is that I was able to sell my tiny initial holding for a fast little profit.

Ramsay Health Care (ASX: RHC)

A non-underwritten SPP, to raise up to A$200 million. Shareholders will be able to apply for up to $30,000 shares, (usually in increments of $1,000 or similar). The SPP closes on Wednesday 20 May. The company has about 78,000 shareholders which means an allocation of about $2,500 each if they all apply and the company allocates without reference to holding size. Given my tiny holding, that’s probably the best case scenario for me if I do apply. The offer is at $56 which should be a decent discount to the current price, but I’ll see closer to the time.

This post is not financial advice, and you should click here to read our detailed disclaimer.

Bapcor (ASX: BAP)

I also bought Bapcor as part of this strategy, on the 15th of April, so due to T+2 settlement, I do not expect to be eligible for the capital raising announced on the 16th of April.

Disclosure: I sold each of these stocks after the capital raising was announced.

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