Placements and listed trusts

When an ASX listed company or trust needs capital quickly, it raises it from institutions and wholesale investors before it goes anywhere near the wider market. The stock is usually offered at a discount to the last traded price, and the allocation is decided in a day.

Barker Wealth gives wholesale investors access to that market: placements, entitlement offers, and the new listings and initial raisings of listed investment trusts.

What we access

Placements and secondary raisings

Discounted allocations in ASX placements, accelerated entitlement offers and share purchase plans, alongside the term sheet and our reading of why the capital is being raised.

New listings and IPOs

Participation in initial public offerings and the first raisings of newly listed vehicles, assessed on the vendor, the escrow arrangements and the valuation at which existing holders are selling.

Listed investment trusts

LITs, LICs and listed REITs, including new listings, where a closed-end structure gives a manager a permanent capital base and gives you daily liquidity.

Why a discount is not the same as a profit

A placement priced at a 10% discount to the last close is not a 10% gain. It is a 10% discount to a price that is about to change, for a reason.

Once the raising is announced, the market reprices the stock to account for the new shares. Existing holders are diluted. If the raise funds an acquisition the market likes, the price can settle above the placement price. If it funds a balance sheet repair the market did not know was needed, it can settle well below it.

So the discount is not the analysis. The analysis is why the company needs the money, what it will do with it, who else is in the book, and what the stock is worth once the new shares exist.

How we assess a deal

• Use of funds. Growth, acquisition, or repair? A raise that plugs a hole is a different proposition from one that funds an identified project.
• Dilution. How many new shares against the existing register, and what the earnings per share looks like afterwards.
• The discount in context. Against the last close, against the recent VWAP, and against where the stock traded before the announcement.
• Who is in the book. Whether existing institutional holders are taking up their share, and whether the board and management are participating.
• Escrow and free float. On new listings, how much stock is restricted, for how long, and what hits the market when escrow lifts.
• Structure, for listed trusts. Fee load, the manager’s track record in the same strategy, and whether comparable vehicles trade above or below net tangible assets.

Listed trusts and the discount to NTA

A listed investment trust holds a portfolio and trades as a single security. Its share price and the value of what it holds are two different numbers, and they routinely disagree.

Many Australian LICs and LITs trade persistently below their net tangible assets. That can be an opportunity, where the discount is temporary and the manager is sound. It can also be a permanent feature of a vehicle the market does not want, in which case the discount is the market’s verdict rather than a mispricing. A new listing is typically issued at or near NTA after costs, which means the discount, if one appears, appears on your holding.

The risks you are taking

• Market risk. These are listed equities and listed trusts. The price moves daily and can fall below the price you paid, immediately and by more than the discount.
• Allocation risk. Books are frequently scaled back. You may receive less than you applied for, or nothing.
• Timing risk. Deals are offered and closed inside a day or two, which compresses the time available for analysis.
• Liquidity risk. Smaller listed companies and trusts can be thin. An exit at scale moves the price.
• Discount risk. A listed trust can trade below its net tangible assets for extended periods regardless of how the underlying portfolio performs.
• Escrow and overhang. On new listings, restricted stock coming out of escrow can weigh on the price at a known date.

Participation in any offer is subject to allocation and is not guaranteed. Past performance is not a reliable indicator of future performance.

Who this is for

Access is available to wholesale and sophisticated investors as defined by the Corporations Act: broadly, net assets of $2.5m or more, or gross income above $250,000 p.a. in each of the past two financial years, certified by a qualified accountant.

It suits investors who already hold listed equities, are comfortable with daily price movement, and can make a decision inside a short window. It is not an income strategy, and it is not a substitute for the defensive part of a portfolio.

How it works

Step 1. Verify and understand.

We confirm your wholesale or sophisticated investor status and agree in advance the sectors, sizes and structures you want to see, so that a live deal does not arrive cold.

Step 2. The deal arrives, with our view.

When an offer opens you receive the terms, the use of funds, our analysis and the case against, in time to act. Where we do not like a deal we say so and pass.

Step 3. You decide, we execute.

You confirm your bid. We lodge it, manage the allocation and settlement, hold the position in your name, and report performance transparently.

Frequently asked questions

Why can retail investors not access placements?

Placements are made under exemptions that allow a company to issue stock quickly without a prospectus, and those exemptions apply to institutional and wholesale investors. Retail holders are typically offered a share purchase plan afterwards, at a different price and in a capped amount.

Am I guaranteed an allocation?

No. Books are often oversubscribed and scaled back at the discretion of the lead manager and the issuer. We tell you the likely outcome before you bid, and we do not treat a bid as a position until it is confirmed.

How quickly do I need to decide?

Often within hours. That is the nature of the market, and it is why we agree your parameters in advance rather than starting the conversation when a deal is live.

What is the difference between an LIC and an LIT?

A listed investment company is a company and pays franked dividends from after-tax profits. A listed investment trust is a trust and distributes income to unitholders, who are taxed on their share. The structure affects the tax outcome and the manager’s flexibility over distributions.

Can my SMSF participate?

Yes, where it is consistent with the fund’s investment strategy and its trust deed, and where the fund meets the wholesale investor test in its own right.

What does Barker Wealth charge?

Our fees and any benefits we receive are set out in our Financial Services Guide, available on this website or by calling (02) 8018 8998.

Where this sits in a portfolio

Listed exposure is the growth end of the spectrum and works alongside the income assets that sit to its left. Read more about Commercial Property, Private Credit and Private Equity, or see how the whole portfolio fits together on our Investments page.