The Ideas Lab: Ausenco SPP
If you followed the GrainCorp opportunity highlighted last week, you may also be interested in yesterday’s announcement from mineral processing plant specialist Ausenco (AAX). The company raised $40.5m through an institutional placement and is following it up with a share purchase plan (SPP). The record date for the plan is 4 June, which means that anyone who buys shares today (and possibly Monday) should be eligible to apply for up to $15,000 worth of additional shares through the SPP. As with GrainCorp, we use the term ‘up to’ deliberately, to account for the likelihood of a scale back provision in the SPP rules (to be despatched on 9 June).
By buying a minimum number of Ausenco shares (say, 150) with this entitlement, you will be outlaying around $500. This should give you an option over up to $15,000 worth of Ausenco shares up to the SPP closing date of 30 June at a price of no more than $3.20 per share.
This is another example where a cheap option (a $500 investment in Ausenco) could potentially deliver us thousands of dollars in gains for a modest amount of risk. Those risks are essentially the same as the ones laid out in Gareth’s original article on GrainCorp. The initial margin between the market price ($3.57) and the SPP price ($3.20) isn’t as wide as it was with GrainCorp, but most of our analysts are fans of cheap optionality. If Ausenco’s share price moves up strongly (which, of course, for any number of reasons is possible) then those with an option to buy shares at $3.20 will be very happy.
Incidentally, GrainCorp has released the booklet with details of its SPP today. Gareth is planning to post a brief update on that situation later today.