Screwing shareholders didn’t save BOQ money

The numbers suggest that BOQ was itself “screwed over” by a pair of investment bank heavyweights who facilitated its latest capital raising.

The numbers suggest that BOQ was itself “screwed over”.

Bank of Queensland screwed its retail shareholders three ways to Christmas – and even admitted it was doing so.

In contrast, as I’ve noted, in very similar circumstances - funding a big acquisition - Computershare treated ALL its shareholders exactly equally.

It also did so with exquisite timing – just after the embarrassingly tawdry BoQ exercise was coming to its grubby conclusion, while even noting that we, Computershare, did our exercise the fair way.

That’s, by the way, embarrassing not only to the board of directors of BoQ, but also our two fake regulators, ASX and ASIC. But I have to say, I think they are too institutionally dumb to be embarrassed.

What’s passed unremarked is that both exercises – the good one and the bad and ugly one – were facilitated by exactly the same pair of investment bank underwriters, Goldman Sachs and UBS.

The terms on which they underwrote the two issues gives the lie to any claim that the ‘screwing retail route’ saves money for the company and so can be ‘justified’ as being in the best interests of shareholders generally.

Indeed, the numbers suggest that exactly the opposite could be the case: that the ‘screwer’, BoQ, was itself screwed over.

Computershare got its issue fully underwritten for a fee of 1.25 per cent. This was cheaper than the 1.4 per cent BoQ paid – to repeat, to exactly the same duo, Goldman and UBS.

Now, underwritings and their fees are a little more complicated. Both companies also paid Goldman (and interestingly, only Goldman) a ‘management fee’.

BoQ paid 0.25 per cent and Computershare a much heftier 0.6 per cent; again in both cases on the full amount of the issue.

So all-up BoQ actually paid 1.65 per cent and Computershare 1.85 per cent. So BoQ got its underwriting slightly cheaper?

Well, no; there’s more.

In the “absolute discretion” of BoQ a further 0.1 per cent could be paid on the management fee.

And, also in the BoQ case, Goldman and UBS “may” become entitled to a “discretionary incentive fee” of “up to” 0.55 per cent of the proceeds.

Computershare had none of these extras: just the flat total 1.85 per cent.

In contrast BoQ could have ended up paying as much as 2.3 per cent to Goldman and UBS for – as I have explained so frequently – the two IBs effectively handing out free, immediate and upfront, profits to institutional investors.

In this case, being paid up to a tasty $3Im for playing Santa Claus in March.

Maybe a BoQ shareholders could ask the board how much of these ‘extras’ it did pay to Santa Goldman and Santa UBS and on what basis.

And while we are on maybes, maybe the board of BoQ should have sub-contracted to the board of Computershare the negotiation of their underwriting agreement.

As I said, BoQ screwed over its retail holders three ways.

First with the placement of shares at $7.35 to instos and only (selected) instos at $7.35 when the share price was $8.41.

Then with the non-renounceable issue. If you didn’t subscribe you lost the value of your ‘right’ to buy a new share.

Then by setting only nine days – so only seven postal days – for the issue documents to get to them and to have them returned.

Computershare, exquisitely, fairly, turning the knife, is giving its retail holders 19 days.

BoQ also gave retail holders the right to subscribe for more than their entitlements.

Sounds good, but only if you could; and only about one-fifth of the half of retail that did subscribe did so.

It was also where the clueless board admitted to – partially – knowing what it was doing; saying this offer was to “minimise the dilutionary impact of the placement”.

Originally published as Screwing shareholders didn’t save BOQ money