The Courier-Mail

No free money for investors as $3.5b bank D-Day arrives


IT IS decision day for retail shareholde­rs in the ANZ and Commonweal­th banks. Do they pour $3.5 billion into buying new shares in the two banks?

Today is the last day to subscribe for, in the CBA’s case, shares in its $3 billion pro-rata issue; and in ANZ’s case its $500 million share purchase plan.

Normally, those decisions would have long since been made. It would have been a nobrainer. You would have been subscribin­g in effect for “free money” – buying shares at a significan­t discount to what they were selling for on the market. When CBA announced its issue, its shares were selling at the equivalent of $79.90. So asking shareholde­rs to pay $71.50 for new shares seemed to have a comfortabl­e buffer. Yesterday CBA closed at $72.32 – so the subscriber discount was down to just 1.1 per cent.

So it remains a close-run thing. Do you part with $71.50 to buy a share worth $72.32, subject to what happens today? The no-lose arbitrage would be to sell an equivalent number of shares on market to what you then buy through the issue, provided the price plus brokerage was still higher than $71.50.

ANZ retail share- holders will get new shares at a massive discount to the $30.95 price paid by the institutio­ns. The issue price is set on the basis of the volume weighted average price of trades over the last three days of last week and the first two days of this week – plus a discount of 2 per cent off that figure. A crude calculatio­n would see the shares issued at $26.56 – very close to the $26.71 at which they closed yesterday. This is not the way it’s supposed to be. For the past decade subscribin­g for bank share issues has been an exercise in buying “free money”.

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