Over the last couple of weeks I, Claude here, have been buying tiny positions in a wide range of companies in the hope that these holdings will give me the right to buy shares at a discounted (and attractive) price. Here are three shares that I’ve bought so far.
Vista Group International Ltd (ASX: VGL)
Vista is a provider of cinema management software and had very negative free cash flow in FY 2019, due to software development expenses.
Unsurprisingly, given the huge impact on its cinema customers, Vista has already announced it will raise capital by way of a “1 for 4.37 pro-rata non-renounceable accelerated entitlement offer” at a price of NZ$1.05 per share. Its last close was NZ$1.49 per share, so that is a very nice discount, but small shareholders like me will only be able to apply for 140% of their current entitlement, which works out as about 32% of the original holding.
That’s not ideal, since my strategy works best when there is an SPP that allows at least a minimum allotment. It’s unfair on larger shareholders, but works out better if you have a tiny shareholder.
Bapcor Ltd (ASX: BAP)
Bapcor operates in the automotive industry selling parts to mechanics as well as accessories and other products to retail customers. It’s a good business but it has been hit hard by the shutdown and recently announced a capital raising at $4.40 per New Share.
Happily for small shareholders, it also announced a share purchase plan (SPP) to retail shareholders. If the SPP is shared evenly (but not on a pro-rata basis) then I think each shareholder will be entitled to about $1,500 worth of shares at the capital raising price. However, every SPP is different so there is no guarantee this will be the case. I sold my Bapcor shares for a small profit after the capital raising was announced.
Integral Diagnostics (ASX: IDX)
Integral is a radiology imaging businesses running clinics in both the community and at hospital sites. While it is an essential service, many of its sites will be closed during the shut-down, so it may need to raise capital.
There are no guarantees, but its competitor Capitol Health Ltd (ASX: CAJ) has already raised capital and think the company will survive one way or another, so I’d be happy to get discounted shares at the right price, if offered.
For more information about this strategy of buying discounted shares, you can read this short article called A Retail Investor’s Strategy For Discounted Capital Raises.
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