Retail shareholders still treated unfairly

Retail shareholders still being treated unfairly by ASX-listed companies

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

You'd think that ASX-listed companies and their boards would have gotten the message by now.

Retail shareholders are sick and tired of investment banks and brokers taking large fees for institutional placements, diluting retail shareholders and favouring their institutional clients.

Earlier this week it was Vocus Communications (ASX: VOC) issuing 11.9 million shares at a 10% discount to the last trade price, to raise $48.7 million in capital. The shares were issued to new and existing institutional shareholders, while retail shareholders have been left out in the cold. No share purchase plan was announced, and retail shareholders have seen the value of their shareholding eroded by 15%. As a shareholder in Vocus, I'm deeply unimpressed.

I'm still amazed that favouring large institutions and so-called 'professional' investors through institutional placements is allowed, given it does not treat all shareholders equally.

And then we have Ruralco Holdings Ltd (ASX: RHL), which raised $43.8 million through a fully underwritten non-renounceable pro-rata entitlement offer. Around $6 million of shares not taken up by retail shareholders were allocated to investment bank UBS and other underwriters.

As Australian Shareholders' Association's Stephen Mayne tweeted, "Ruralco should have allowed retail first bite at these shares, or sold through ASX Onmarket Bookbuild." He added, "By limiting 'overs' to just 50% of an investors entitlement, UBS and the Ruralco board deliberately diluted retail."

Now CEO John Maher has told Mr Mayne that Ruralco paid UBS 'a lot of money', and agreed that Ruralco was poorly advised on 'overs'.

Maybe Ruralco needs to find another advisor next time, or perhaps consider a renounceable rights issue?

The ASX Bookbuild facility has been in place since October last year, but has had very few companies using it. It seems the investment banks & brokers fear the facility will erode their fees, and their ability to give their favoured clients preferential treatment.

Clearly, the ASX needs to take further steps to encourage companies to use ASX Bookbuild, and for all shareholders to be treated more fairly.

On the bright side, the self-managed super fund industry is rising in importance and holds around 16% (and growing) of Australia's $1.5 trillion equities market.

Foolish takeaway

Companies that treat their shareholders unfairly earn them a black mark in mine and many other shareholders' books. There are plenty of fish in the sea and only so many chances they will get from me.

Motley Fool writer/analyst Mike King owns shares in Vocus, but is not sure for how much longer. You can follow Mike on Twitter @TMFKinga

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »