By Stephen Mayne
When shares in Macquarie Leisure jumped 10 cents to $1.45 on Friday - hitting an intra-day high of $1.54 - it wasn't just because the independent directors had risen up and negotiated an expensive divorce from the Millionaires' Factory.
There were certainly some trophy assets to be divided up because Macquarie Leisure owns Dreamworld and Whitewater World on the Gold Coast, a chain of health clubs, numerous ten pin bowling alleys and Australia's largest portfolio of marinas, including The Spit in Manly.
Sure, paying Macquarie Group $17 million up front to surrender ongoing management fees of $3-5 million a year looks like a good deal for shareholders, but another reason for Friday's market reaction was the way the associated $69 million equity raising was structured.
Australia has witnessed a cowboy system of capital raisings over the past few months that comprehensively failed to treat all shareholders equitably and led to huge value dilution for the majority of small shareholders.
Macquarie Leisure directors joined this unfortunate club last Thursday when they did a $41.7 million institutional placement at the heavily discounted price of $1.15 a share.
Surely the board knew that the shares would be re-rated - as a buy - once the fee leakage, poor governance and associated advisory conflicts of interest common to all the listed Macquarie funds had been removed.
Not surprisingly, Macquarie Leisure Trust shares have remained active today. Trading volume reached 4.5 million, or about 10 times the full-day average over the past year. Shares ended unchanged at $1.45.
The placement was ''significantly over-subscribed'' and the lucky clients of under-writers Macquarie and RBS have made a paper profit of more than $10 million. Where was the price tension? Where was the book build to minimise dilution?
The existing Macquarie Leisure shareholders will be further diluted because the board announced a $15,000 share purchase plan for retail investors with a record date of next Thursday, July 2.
Therefore, anyone who buys $500 worth of shares before close of trading today (Monday) will settle in the standard three business days and therefore qualify to apply for up to $15,000 worth of Macquarie Leisure shares in the SPP at only $1.15 a pop.
I was already on the register but three associates each bought $500 worth on Friday and we'll be collectively stumping up $60,000 in an attempt to make a quick $20,000 profit.
Macquarie Leisure has said there is only $18.3 million available for the share purchase plan, so it is likely to be massively over-subscribed and heavily scaled back.
Macquarie Leisure CEO Greg Shaw told BusinessDay the company only had 7000 retail shareholders and adding a few more would boost liquidity and turnover which in turn could help the stock make the ASX top 200.
Whilst Shaw admitted that ''obviously this is an opportunity for some people to take up'', he claimed the board ``was not actively encouraging it''.
Unfortunately, the news spread like wildfire online on Friday when there were 3683 separate trades in Macquarie Leisure compared with some days of less than 200. The average trade was only 1314 shares worth just under $2000.
Readers of this article may as well get on board with the minimum $500 purchase by close of business today as well. However, be warned that the greater the take-up, the larger the potential scale back.
Investors who get on the register today are essentially buying a cheap option to purchase up to $15,000 worth of shares at a 20% discount. However, the shares could weaken later in the week. Indeed, today would be a good time to partially sell down given thousands more investors will be buying to qualify for the offer.
Assuming Macquarie Leisure finishes with 15,000 registered shareholders by Thursday, that's a potential $225 million worth of applications chasing just $18.3 million.
The original 7000 Macquarie Leisure shareholders should be furious because they have already been diluted through the institutional offer and will now probably get scaled back in the retail offer because the board left the door open for thousands of opportunists.
Leaving aside all those brickbats on what is ultimately a fairly immaterial issue in financial terms, the non-executive directors of Macquarie Leisure, led by chairman Neil Balnaves and Anne Keating, are to be congratulated for successfully forging an independent future.
Macquarie obviously drove a hard bargain extracting $17 million for its management contract, but the process was driven by the independent directors who took their responsibilities seriously. Macquarie didn't seek or particularly want the deal and negotiated in their usual aggressive way.
Anyone who thinks this automatically means Macquarie Airports and Macquarie Infrastructure Group will go down the same path ought to look at just who are the independent directors on those boards.
Macquarie Leisure chairman Neil Balnaves was both independent and independently wealthy. He wasn't dependent on Macquarie for his lifestyle.
The same can't be said for MAP chairman Max Moore-Wilton or MIG chairman Mark Johnson, both of whom have made many millions out of the investment bank.
The best thing about Macquarie Leisure's internalisation proposal is that CEO Greg Shaw will now actually work for the directors and the shareholders of the renamed group, rather than being employed by Macquarie on a salary that has never been disclosed.
However, shareholders should take him to task at the next annual general meeting for the way he handled this dilutive $69 million capital raising. The fairest way to raise capital is through renounceable rights issues and it's time more Australian companies followed the current lead being set by mining giant Rio Tinto.
, a shareholder activist and publisher ofcontributed this article toHe can be reached on