BOQ shares take a leap after capital raising

BANK of Queensland's small investors might have been short-sheeted by the terms of the company's $450 million capital raising - but they are hardly likely to complain much after the shares bolted ahead when they resumed trading yesterday.

The issue's bleary-eyed underwriters at Citigroup wrapped up the institutional component of the raising yesterday, allowing the shares to be relisted for the first time since last week.

Insider was (once again) proved wrong about the conditions being ripe for short-covering because Bank of Queensland's issue was priced at $6.05 and it closed last week at $7.30 a share.

Instead, the shares leapt to a high of $7.74, before closing slightly easier at $7.65 - but still a whopping 26 per cent premium to the price being paid for new stock. The smell of burning shorts must have been strong given that BOQ shares have not touched those levels since early December.

Technically, BOQ shares finished up 57.22? on the day - the mathematical outcome of adjusting for the slightly silly rights ratio of eight new shares for every 37 currently held, which means the theoretical value of shares post-issue was $7.08.

Queries were rightly raised after the issue was unveiled this week about the dilutive effect on non-professional investors of making the issue ''non-renounceable'', which means that if you decided not to take up your entitlement to the new shares, they evaporate from your hands and reappear in the control of the underwriters, who then find investors willing to pay for them.

Had it been a renounceable issue - an increasingly scarce animal in a world where many equity issues are now ''accelerated'' to ensure the cash is quickly raised and banked - BOQ shareholders could probably have been selling their rights for about $1.02 each.

Instead, they now have shares that are worth more than before the issue was announced, and a market that seems to be clearly indicating faith in BOQ's new chief, Stuart Grimshaw, and his game plan - which likely means their bank managers will happily lend for the retail component of the issue.

Citigroup Global Markets' John McLean, between bedding down BOQ and finalising Tuesday's Beach Energy raising, told Insider the appetite for financial stocks that are well-capitalised and liquid was growing - nobly mentioning QBE's similarly sized, and quickly absorbed, capital-raising at the end of February run by Macquarie Group.

PaperlinX angst continuesFRESH from, narrowly, defeating the shareholder ginger group that tried to depose chairman Harry Boon, it appears that PaperlinX is tiring of critics.

Insider was yesterday one of the privileged few to be copied in on a written response from PaperlinX chief executive Toby Marchant to Graham Critchley, grumpy hybrids investor and author of the paperlinx-sux website, that looked awfully like the prelude to a lawyer's letter.

PaperlinX fired a shot across the website's bows last year when the campaign to change the board was really only beginning, sending what the legal trade calls a ''concerns'' notice - essentially the first step in the chain of launching defamation proceedings.

Marchant's latest letter asks for ''retraction and apology'' over the content of an email from Critchley that contained an anonymous tip, rather than something actually published on his website. The inclusion of journalists, would-be executive director Andrew Price and his supporters as recipients of the email appears to be what worried PaperlinX.

Insider did note, though, that in Marchant's response he included a sentence that may not have been the smartest in the context of a shareholder campaign over collapsed value and alleged corporate excess:

''The restructuring in the UK has led to a number of senior people leaving the business, all of whom were treated with respect and offered severance packages well above the legal requirement,'' wrote Marchant.

Insider understands that what Marchant was trying to say there was that the company made sure that those it pushed out the door, it treated fairly, and that ''whistleblowers'' have little to complain about in a financial sense.

Insider reckons Marchant ought to keep his focus on trying to turn around a waterlogged ship. Since the shareholder vote last Friday, the stock has slumped to close at 9.4? yesterday - which vindicates those sellers behind the 15 million shares flogged last Friday, mostly through CommSec, at up to 12?. Even significant shareholder Schroders Investments, which swung behind Boon after what Insider hears was a well-placed phone call from director Michael McConnell, might rethink its attitude if things do not improve.

PaperlinX received a tentative 9?-a-share proposal for the company last December, that is starting to look good again the way things are going.

It reminded Insider of now departed chairman David Meiklejohn's comments after the 2010 annual meeting, where he talked about the removal of previous chief executive Tom Park as ''he would have liked to stay on a bit longer and been part of the upswing, but he understood the situation''.

Some upswing - the shares were about 45? then and have not been above 20? in almost a year.

Retail groups stay mumWOOLWORTHS and the Ackerman family's Pick'n Pay group are doing their best to deflate an off-the-shelf story doing the rounds that the Australian group might buy into its South African cousin.

Reports started appearing in the South African media in the past few days that representatives of Woolies and/or a Dutch retail house were talking with Pick'n Pay about taking shares, but both retail groups last night dead-batted Insider's inquiries.

''Pick'n Pay prefers not to comment on rumour or speculation in the market ? we frequently engage with a wide variety of international retailers for strategic reasons, and equally frequently exchange information where we can learn from each other. This will continue,'' was the word from Pick'n Pay. Woolies was similarly disinclined to engage - using remarkably similar phrases about meeting frequently with other global retailers to talk on a number of issues.

insider@fairfaxmedia.com.au