LIC & LIT Whitefield Limited SPP

It's been raining, I got soaked on a walk and now I'm inside with a hot mug of coffee. So I looked at the ASX announcements. If any are inclined to do so, get ya BPay ready.

WHF SPP. $4.31 or 2.5% VWAP over five days up to 30 November. $15k limit as per usual.

Dates:

Open to those on the share registry at 6 November
Offer opens 19 November
Offer closes 30 November
Price announced 5 December
Shares allotted 14 December

 

Note the WHF offer is ex dividend(9.5c+franking credit).

 

I thought Christmas was in December

 

Hmm, I've heard of Christmas in July so maybe this is a slight variation?

Anyways, I'll give the offer some consideration but taking into account I've applied for my WHFPB holdings to be converted.

 

Agree - Nice early Christmas present!!

 

Can anyone comment on how/whether the WHF SPP will dilute NTA? I thought SPPs significantly below NTA were frowned upon. Didn’t BKI kick up some animosity here not long ago for doing that? Even going by the average long term discount to NTA rather than the NTA itself, this SPP is solidly discounted. Why the positivity around it then?

(Sorry if that’s a dumb question! I just got in on WHF a couple of weeks ago, so I’m tempted to top up now if I can find the cash, but need to understand it better first.)

 

I think it will dilute NTA, im guessing however a few additional SPPs over the next few years may improve cap size which may lower the MER and also Improve liquidity which might help narrow the gap between SP and NTA.

 

I'm a simple person in many ways. If all take up the max of the SPP I guess no effective dilution. If only some do yes for those who don't. Same with those who only take up a portion.

When I buy or participate, it revolves around how many I currently have, do I want more, what is the probable yield, have I confidence in the managers, is the NTA as an indicator completely out of whack - and what's the price. All subjective probably and totally unscientific.

I reckon your not buying the NTA but at the price at which you are comfortable.

Too many other things going on to stress about it such as I really, really want that Martin 000-17SM I've spotted. Get thee behind me Satan of GAS.

 

No, not allowed to get it until you’ve mastered the basics first as demonstrated in the following video:

 

Yep he wrings the living s!ht out of it.

However, with the greatest respect, you do know the difference between an electric and acoustic guitar?

Although I am aware of one player who can get close without humbuckers.

 

Fair enough.

Ok here’s a simple warm up exercise on the acoustic:

 

Haha. I can see what's happening to this thread - sorry mods.

Roy Clark, Malaguena on The Odd Couple.

 

Once disorderly, always disorderly. Since I’m beyond help the only solution is probably to ban me.

 

For the clueless among us, can someone explain in simple terms what dilution actually means and how it happens?

 

Investopedia is your friend!

The Dangers of Share Dilution

 

Ok, that's basically what I thought.

So what I don't understand in a situation like the WHF SPP is how buying more shares stops your investment from being diluted.

I mean I get that by fully participating your percentage of ownership of the company will remain unchanged, or even grow if other shareholders don't fully participate. But don't you just end up with more shares that cost you more money all up to purchase and therefore the value of each share is still diluted even if your overall investment is still the same value?

I feel I'm missing something obvious here.

 

You're probably missing how miniscule the dilution is.

 

Not the best piece RE LIC SPP dilution, IMO.

They are creating new shares below the value of current shares.
In this case a 7.5% discount to NTA (per the SPP annoucement).
If you had a bank account with $100 in it, would you be happy for me to add $92.50 to the account and then say we own half the money each? Don't forget I am also going to charge you all fees and charges associated with me been added to the account.

It doesn't, your current holdings are diluted. Although you could work out the exact sweetspot where you extract the exact value of the discount on your new shares.

Not true. If you have a large holding you may end up owning less and a smaller holder could end up holding a higher %. Generally speaking SPPs favour small holders.

Yes, you get more shares for more money.
Existing shares are diluted
New shares are a bargain, You have bought a dollar at a 7.5% discount... until the next SPP when these are diluted by the new SPP discounted shares.

Don't worry WHF is in the know and will spend these new penny's wisely and add value. It definitely absolutely isn't about taking in captive funds to increase FUM without reducing MER by an relative amount.

It is around 1 new share @ a 7.5% discount for every 8.75 existing. These things add up over the next 10 SPPs.

You can take any view you want on all this you want. SPPs of the past haven't seemed to ruin LICs as a quality investment vehicle or maybe things really are different and the maths will catch up with them.

 

Thanks Hodor, that makes the situation much clearer.

 

My approach in practice will be wake up on Nov 30 have a stretch, flip a coin and not give it any real thought.