Share Purchase Plan
WHAT IS A SHARE PURCHASE PLAN
A Share Purchase Plan (SPP) offers shareholders in a company the opportunity to purchase additional shares in that company, free of brokerage. They are usually offered at a discount to the current market price and the maximum each shareholder can take up is $5000 worth. Institutions and large shareholders are not interested in $5000 worth of stock, so they never look at these offers.
Companies use Share Purchase Plans as one of a few alternative ways to raise funds. They are a preferred method by some companies as fund raising under a Share Purchase Plan the company is not subject to a requirement to lodge a prospectus with ASIC, which can be expensive.
Most shareholders have seen profitable results by applying for discounted stock through Share Purchase Plans in ‘blue chip’ stocks they already hold, however, few shareholders know of the potential rewards of searching for all available Share Purchase Plans and taking up the ones which provide a great enough discount to the prevailing market price.
It is not uncommon for companies to offer Share Purchase Plan stock at a 10-20% discount to their current market price. It is also not uncommon for these companies to leave a window of one or two days whereby an investor can become a shareholder and take up the offer of the company.
An outline of a Share Purchase Plan strategy is as follows:
- Search the market for companies conducting Share Purchase Plans that meet the following criteria:
- Offering new shares through an Share Purchase Plan at a 10% or more discount to their current market price, AND
- There is a window of sufficient time to become a shareholder to qualify for the offer.
- Where companies fit this criteria, purchase at least $500 worth of stock to participate.
- Sell that initial parcel of shares back into the market once the qualification day has passed as this removes any further downside risk from holding the company’s stock.
- Wait for the SPP documentation to arrive via post. During that time, the company’s share price to monitored to ensure that a 10% discount (or greater) continues to exist between the company share price and SPP offer price.
- If the price remains flat or rises, thus providing a high probability of at least 10% profit by accepting the Share Purchase Plan, take up the Share Purchase Plan offer by posting a cheque (to a maximum of $5,000) back to the company prior to the offer close date.
Once allocated, stock is immediately sold. Assuming that the share price did not change significantly during the time it takes for the company to process our applications we would expect to make a minimum return of 10% on our investment over the period (typically 2-6 weeks).
Click Here - To register your interest to open a Share Purchase Plan Trading Account
IMPORTANT
This document has been prepared without consideration of your specific investment objective. You must therefore assess whether it is appropriate, in the light of your own individual objectives, financial situation or needs, to act upon this information. While this document is based on information from sources which are considered reliable, Tangible Assets Financial Services, its directors and employees do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate.
Nor does Tangible Assets Financial Services accept any responsibility to inform you of any matter that subsequently comes to its notice, which may affect any of the information contained in this document. This document is a private communication to clients and is not intended for public circulation or for the use on any third party, without the prior approval of Tangible Assets Financial Services. AFSL 309666
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