Share Investor: Sky City share offer

Wednesday, May 6, 2009

Sky City share offer confusing and unfair for smaller shareholders

I was going to discuss the merits of owning Contact Energy Ltd [CEN.NZ] shares in the light of takeover signs surfacing recently over that company but I will leave it to another day.

I will instead focus on something today that has left me scratching my head.

Many of those that follow my media machinations closely will know that I own a reasonable number of Sky City Entertainment [SKC.NZ] shares.

There has been a recent capital raising to institutions and large shareholders and now we smaller unimportant shareholders are about to have their opportunity to buy an additional stake to avoid dilution of our shareholdings.

Today I received "top-up" offer documents that allow me to buy 1269 shares in the $5 million offer but I have to be either an "experienced" or "wealthy" investor to participate and I must get a "certificate" from my chartered accountant or my "financial service provider" to prove I am either so I can get my new shares.

The only problem is that I don't have either of the above but then I read on that I will probably not be eligible anyway because the top up offer is conditional on the $35 million Share Purchase Plan (SPP) not being fully subscribed, which is highly unlikely to happen given major oversubscriptions in popular capital raisings thus far completed by listed New Zealand companies.

The other wee problem is that I haven't received the SPP documents or booklet that the covering letter says I should read to determine whether I should consider the offer.

The top up offer seems superfluous to requirements because it gets canned if there is an oversub of the SSP but even if there was going to be a top up many wouldn't bother because they have to be "wealthy" (have net assets of $2 million or gross income of more than 200k for each of the last two years) or be an "experienced investor" and be able to prove both using your accountant or financial advisor.

I really cant be bother with the top up because I cannot bloody fully understand it! and it seems to run counter to commonsense because it probably wont occur anyway.

All I am entitled to then is to apply for a maximum of NZ$12500 of shares and it seems given the large interest in the $230 million SKC corporate capital raising carried out in April and an over subscription in the Fletcher Building offer concluded this week, I am unlikely to get anything close to that figure.

I would need to get my hands on around 5000 shares at the offer price of $2.61 per share in order to stop dilution of my position but unlike the corporates and large shareholders my shareholding in Sky City Entertainment of 7 years is going to be seriously diluted.

I will be applying for the maximum under the SSP.

Contact Energy will follow soon.