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Thursday, 7 June 2018
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Cartel Accusations Pt.2

There is another angle to it - the ARI's are often accompanied by a SPP for the long-suffering shareholders as a hose-them-down-before-they-start-whining-to-ASIC tactic. The SPP is usually an "up to $15,000" window-dressing affair with the caveat "the directors reserve the right to scale back any oversubscriptions" or similar. Most times the SPP is well oversubscribed. One recent example a few years ago was FAR which scaled back by 96%!! I was teaching corporate finance at XXXXXX Uni at the time and gave it to my students as an example of how the big end of town does over the little guys with the blessing of the government and the public servants - all handsomely rewarded by us.

CVN is another company whose directors have just plundered their shareholders. The directors announced on 11 May that they had placed 123m new shares at 13 cents to the heavy mob and were doing a SPP of up to $15,000 per shareholder with a cap of 31m shares for the small fry, also at 13 cents. That's 20% of the total new shares - a nasty dilution - and a month later, needless to say, the shares fell way below their TERP (theoretical ex-rights price). They were 17.5 cents prior to the trading halt and closed at 12.5 on 28 May. They were 14c today. The scale back was 55%.

But, of course, all this goes unreported to ASIC who is asleep at the wheel anyway. If we are going to call our regulator a "watchdog", we can't be surprised when all it does is watch...and watch. What we need is a guard dog, and preferably one that is foaming at the mouth. And so the rooting continues...

Here is a Morningstar article from Peter Warnes complaining about the same thing:

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