By Eric Johnston
QBE has insisted it attempted to favour retail investors under a $600 million capital raising despite many smaller shareholders this week left scrambling for stock.
The comments came as the Australian Securities and Investments Commission this week warned that it may toughen laws if such shareholders are repeatedly disadvantaged in raisings.
QBE pushed ahead with its capital raising under a share purchase plan, a mechanism that limits capital raisings to the proportion of shares held by existing shareholders.
However, with big institutional investors rushing QBE's offer that was priced at $10.70 each, this outcome meant only a smaller slice of the total raising, or $150 million, was left to be spread among retail investors.
The raising, which will be sold to retail investors at the same price, offers the potential for a substantial paper profit on new shares. Since the launch of the capital raising at the start of last month, shares in QBE have traded above $14 each.
QBE this week warned that strong demand from retail investors meant their potential allotment of shares would only be the equivalent of 8.34 per cent of the value of their existing shareholdings.
This result means a retail shareholder with 1000 shares in QBE would be allowed to subscribe to just 83 new shares in the capital rasing.
Retail shareholders with 200 shares can only subscribe to 17 new shares, while those with fewer than 10 QBE shares would not be able to acquire any new shares under the offer.
But QBE chairman Belinda Hutchinson defended the substantial scale-back of the offer, insisting it was biased towards retail investors from the outset.
"The institutional investors were substantially scaled back and were probably scaled back more than the retail shareholders," Ms Hutchinson said.
"We allocated 25 per cent of the total share issue to retail shareholders whereas retail shareholders represent 20 per cent of our shares. So we did try to be fair and look after our retail shareholders," she said.
ASIC deputy chairman Belinda Gibson this week said companies should voluntarily disclose more information about capital raisings.
Bank of Queensland recently came under criticism during its $450 million capital raising, for significantly diluting the holdings of retail investors which made up 55 per cent of the lender's capital base.