Eureka Report Correspondence

Our thoughts on BKI's SPP.

PDFs and weekly wraps

When do the weekly wrap PDFs go online? I could not download a couple of them and would like them for my archives.

  • Sam

Editors’ note: The PDF containing all Eureka Report content is published on Friday afternoons and is included in the Saturday weekend briefing. You can download all previous PDFs via this link: Eureka weekly wrap PDF.

The BKI SPP

Please advise of any information that can be expected from Eureka (Mitchell Sneddon) in regard to the current BKI entitlement.

- Ross

Hi Ross,

From Mitchell Sneddon: I received your email regarding the BKI Share Purchase Plan. I can't say if people should take up the SPP as I don't know what their current exposure is etc. I can tell you the LIC model portfolio will not be taking up its allocation as the portfolio has enough BKI.

What I can say is typically when a fund (especially a closed ended fund) asks for more cash it is generally at a time when people don't want to be separated from their cash. When people feel better about giving more cash across to a manager is generally at the time when they don't want it. With the BKI board deciding now is a good time to raise capital it is because they believe it is a good time to have extra cash on hand.

Also when a LIC raises capital at a price above NTA is it adds value to the current NTA. So for holders of BKI your hope is shareholders feel really positive about this move and open their wallets. Also another benefit of the SPP is BKI over the years has continually reduced its management expense ratio (MER) and with more capital raised look to see the MER reduce further in time. The lower the fees the bigger the dividend. 

Is the SPP a bad thing? No. Raising capital above NTA will increase the NTA. Should people participate? That is up to them. This isn't a situation where an ordinary operating company is asking for capital to make an acquisition or shore up a balance sheet. People when looking at the SPP should ask themselves if more BKI fits into their portfolio.

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