AMA Group Ltd and My Net Fone Limited added to hall of shame

AMA Group Ltd (ASX:AMA) and My Net Fone Limited (ASX:MNF) treating retail investors unfairly

| More on:
a woman

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

If there's one thing we dislike here at the Motley Fool, it's companies treating their smaller shareholders unfairly.

AMA Group Ltd (ASX: AMA) and My Net Fone Limited (ASX: MNF) both earn our ire today for unfair treatment of shareholders.

Smash repairer AMA has today announced that it has raised $45 million in capital via a placement to existing and new shareholders at 60 cents, a 6% discount to the last traded price of 64 cents. What's worse is that AMA is a serial offender – having raised $15 million in 2013 via a placement with retail shareholders again left out in the cold.

Placements to selected investors at a discounted price dilute the holdings of existing shareholders. AMA has issued an additional 75 million shares, which will see the share count rise from 334 million to over 400 million.

We are particularly concerned that shares have been issued to new investors at a discount. If they were such big supporters of the company beforehand, why didn't they already own shares? Why do so-called sophisticated and institutional investors get to buy shares at a discount when retail shareholders are again left out?

AMA executive chairman Ray Malone says the funds raised would be applied to financing growth initiatives and 'meeting ongoing working capital requirements'. But if there's no imminent, urgent need for the funds, why didn't the company do a pro-rata renounceable rights issue to existing shareholders?

We regard that form of capital raising to be the fairest method of raising funds, as it treats all shareholders equally – and doesn't offer discounted shares to investors who obviously weren't interested in the company beforehand. And how were these 'new investors' selected? Were they favoured clients of AMA's brokers perhaps?

Either way, we deplore the actions of AMA once again, and suggest that the board of AMA might want to consider at least offering retail investors the chance to buy discounted shares through a share purchase plan (SPP).

My Net Fone similarly has announced a placement to sophisticated and professional investors, but hasn't even advised how much the company is seeking or the discounted price it is offering to those investors. No share purchase plan has been announced either, suggesting management have little regard for smaller shareholders. We'd suggest that Rene Sugo and his team at My Net Fone might want to consider offering retail investors a chance to buy discounted shares.

Foolish takeaway

Far too often, companies decide to raise capital via a discounted placement to favoured investors and treat their smaller, mostly retail investors unfairly. It's something we take seriously here at The Motley Fool, and companies won't get many chances before they end up in the bad books.

If you want a company to follow as an example, you only have to look as far as Corporate Travel Management Ltd (ASX: CTD). Jamie Pherous and his team have raised capital twice in the past 18 months – both times using a renounceable rights issue to existing shareholders.

 

Motley Fool contributor Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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 »