Capital Raisings

All,

I read a few articles a little while ago about profiting from capital raisings - in particular discounted offers to existing share holders (esp where it is possibly to apply for more than the normal allocation). I came up with a silly strategy that I am contemplating and would be interested in hearing about problems or issues with it.

My thoughts were to sign up for a new account with one of the online brokers offering free brokerage deals for the first x months - usually can get upto $500 free brokerage over a limited time frame. Use this free brokerage (plus some extra) to buy 1 share in a lot of different companies. So for total outlay of $1-2k could have 1 share in 100 companies. Would be hard to ever sell these shares as the brokerage would kill me - so the initial investment is effectively written off (although would receive dividends from them).

Then wait for capital raising offers to come in ... pass time reading all the correspondance I will get from the companies you own. Tax time might be a nightmare with lots of piddly dividend amounts (although could make sure I use a broker who provides a nice tax summary automatically).

Any comments?

Regards,

Jason

 

Brokers / ASX have a minimum parcel size of $500 unless you already own the stock. I doubt you want to have $500 tied up in every security on the off chance in 2 years they might do a SPP. So $20 brokerage to buy, $20 to sell down to 1 unit left, gives you 12 stocks for your $500 free brokerage. Hardly worth it.

There are brokers like IB which will do trades for as low as $6, however they do not participate in CHESS and shares are not held in your own name, so I'm not sure how SPP's are treated.

I used to monitor this website Share Purchase Plan | Online Stockmarket Trading Update for future dated SPP's and where possible short it with a CFD making the spread. Still wasn't risk free as I found out when Macquarie had a massive scaling back on their offer so I was overexposed on my short position.