LMI Monthly Update – SPP’s on the Menu

March 31, 2022

In this edition of the IIR LMI monthly update, we take a look at the key news for the sector in March. There was a number of Share Purchase Plans (SPP’s) announced and completed during the month as LICs and LITs seek to raise additional capital to take advantage of market volatility.

Some of the key news items include:

  • PIMCO Launching First Australian Listed Investment Trust: PIMCO are seeking launch the PIMCO Global Income Opportunities Trust (Proposed ASX Code: PMX). The PDS was lodged with ASIC on 14 March 2022 with the Broker Firm and General Offer scheduled to close on 1 April 2022. Units are expected to commence trading on the ASX on a normal settlement basis on 21 April 2022. The Trust is seeking to raise up to $502.5m (up to $703.5 with Oversubscriptions) through the issue of up to 250m (up to 350m with Oversubscriptions) at a price of $2.00.
  • Argo Investments Limited (ASX: ARG) Raises $191.8m from Share Purchase Plan: ARG completed a Share Purchase Plan on 29 March 2022, with applications totalling $191.8m from 14,544 eligible shareholders. 20.63m new ARG shares will be issued on 31 March 2022 at the issue price of $9.30 per share. The capital raised will be invested in line with the investment strategy.
  • ECP Emerging Growth Limited (ASX: ECP) Seeing to Raise Up to $12.5m through Convertible Note Issue: On 4 March 2022, ECP announced it is seeking to raise up to $12.5m through a listed unsecured redeemable convertible note offer (the “Notes”). The Notes will have a price of $1.43 and will pay a fixed interest rate of 5.50%p.a., paid quarterly until the Step Up Date of 11 April 2025. The Step Up Date will be 3 years after the issue at which time the interest rate will increase to 6.50%p.a. in the event the 2 year Bank Bill Swap Rate (BBSR) is above 2.5859%. In the event the BBSR is not above this rate the interest rate will remain at 5.50%. The Notes will have a Maturity Date of 11 April 2027, at which point all outstanding Notes will be redeemed at face value.
  • Amcil Limited (ASX: AMH) Raised $10m through SPP: During the month, AMH announced that it had raised $10m through the Share Purchase Plan (SPP). Approximately 530 shareholders participated in the SPP, representing a participation rate of 16%. Shares were issued at $1.15 per share with new AMH shares issued on 9 March 2022.
  • Mirrabooka Investments Limited (ASX: MIR) Seeks to Raise Capital through SPP: On 3 March 2022, MIR announced a Share Purchase Plan (SPP) Offer. Eligible shareholders will be able to invest up to $30,000 in MIR shares. The share issued under the SPP will be eligible for 50% of the final dividend that may be declared for FY22. As a result, shares issued under the Offer will trade under a separate code (ASX:MIRNB), until shares trade ex to the final dividend expected to be in July 2022. Shares will be issued at the lower of $3.18 per share or by applying a 10% discount to the VWAP of MIR’s share price over the 5 trading days up to and including the day on which the SPP closes (scheduled to close 4 April 2022). Therefore, the maximum price for shares under the Offer is $3.18 per share.
  • Bailador Technology Investments Limited (ASX: BTI) Sells it’s Investment in SMI: On 11 Match 2022, BTI announced it had entered into an agreement to sell all of its interest in Standard Media Index (SMI) for approximately $20m. The sale price represents an uplift of approximately 67% to the current carrying value of SMI. The sale price is subject to final adjustments and the agreement is subject to certain conditions, including foreign investment regulatory approval. BTI’s portfolio has performed strongly over the 12-months to 28 February 2022, with the pre-tax NTA (including dividends) increasing 23.4%. This compares to the 10.0% increase in the ASX All Ordinaries Accumulation Index over the period. Over the last six months, the pre-tax NTA has increased 17.3%, however the share price has declined 23.7%, resulting in the share price trading at a substantial discount to pre-tax NTA of 32.4% and a discount to post-tax NTA of 21.7% at February-end. The sell off comes with a market correction in the Information Technology sector. The S&P/ASX 200 Information Technology Accumulation Index declined 28.5% over the six-month period. In it’s February monthly update to the market, the Manager reiterated that the BTI portfolio is conservatively valued, most the companies in the portfolio are cashflow positive or cashflow breakeven, all are well financed and the most recent investments have been in the health care sector. We note that SiteMinder remains the largest holding in the portfolio and the share price has experienced a continued decline in March which will have a negative impact of the March NTA, however this will be offset to some degree by the valuation uplift of InstantScripts that was announced on 31 March 2022. BTI has made a follow-on investment in InstantScripts of $7.7m on top of the existing $7.8m investment.
  • VGI Partners and Regal Funds Management Set to Merge: On 30 March 2022, VGI Partners (VGI) and Regal Funds Management (Regal) entered into a Merger Implementation Deed in relation to the merger of the two firms. On implementation of the merger, VGI will acquire 100% of the shares in Regal in consideration for the issue of new VGI ordinary shares. Immediately following the merger, VGI shareholders will represent approximately 33.3% of the merged entity and Regal shareholders will represent the remaining ~66.7%. VGI will remain listed however will seek to be renamed post the merger and a new ticker assigned. The merger is subject to VGI shareholder approval. The VGI Board intend to unanimously recommend that VGI shareholders vote in favour of the merger, in the absence of a superior proposal, to create a market-leading alternative investment manager.

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