The Ideas Lab: GrainCorp follow up

GrainCorp released its Share Purchase Plan (SPP) rules and information booklet yesterday, and the outcome is a little disappointing for those of us who bought $500 worth of shares recently.

The company has, unsurprisingly, reserved the right to scale back applications, which removes the possibility of hedging through short selling, as discussed in our original Ideas Lab article. Put options might still be a possibility for those keen to hedge, but I won’t be exploring that avenue.

A further setback is in the wording of the scale back provision (note 9 of the document) where it says that the board may take into account ‘the number of shares held at the Record date’. So it’s possible that those of us who bought a small parcel of shares will eventually have our cheque returned and not receive any additional shares through the SPP. In the event that GrainCorp is swamped with applications, it’s more likely that everyone will be scaled back, but directors have reserved the right to be choosey.

Payments via cheque or BPAY need to be received by the share registry on or before 29 June. Closer to that date, if the stock is trading well in excess of the $6.25 SPP price (greater than $7.00), I’ll likely send in my money and hope for the best. It still strikes me as a worthy speculation.