Upfront Investor | My Thoughts on Additional Share Issues….

Over the many years I have been assisting people from all walks of life to invest in the market I am often asked what I think about companies raising capital through additional share issues. My first and official response is that such a decision must meet market regulations. I also believe that any such action needs to pass a fairness test, making the opportunity open to all shareholders. However, in reality, this is not what always occurs and is why the recent announcement by the Australian Stock exchange (ASX) to release the ASX On-Market BookBuild may be an important first step in the right direction.

Sometimes companies issue shares to institutions but retail investors miss out. This type of issue is called an institutional placement, where listed companies can work with the big end of town to raise capital and not have to involve ordinary investors. The cost savings involved in issuing shares to a few big players rather than all shareholders on a company’s books could be significant, and carried out this way the process is likely to be simpler to manage.

I would like to see a more level playing field and the technology exists to do it. The decision by the Australian Securities Exchange (ASX) to release the ASX On-Market BookBuild is a very important step but currently this service is not open to all investors, but it does proved high net worth investors access to capital raisings. Although as a retail investor this is not the answer you may have been looking for, however, further developments are likely to follow in time.

So what do we expect in the market?

The Australian share market experienced further downside pressure this week, which eventually saw the All Ordinaries Index drop below the prior trough at 5118 points in October 2013. What is interesting is how the current fall has been slightly longer in time and lower in price than I expected to see unfold. However, when considering the decline in perspective against the prior strong rise from June 2013 it is logical to expect the market might slow down to this degree and come back part way to test prior support above a very strong historical level at 5000 points (set by the market in 2010 and 2011) before it confirms the next move up. Ideally, I would like to see the Australian market start to turn back up in the next week or two and until strength returns I continue to take a conservative view towards the market and suggest investors do the same.


To your profitable trading,

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’. Dale has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment adviceto traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.