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The great rip-off: Investors short-changed as institutions gorge on capital raisings


A massive transfer of $3.6 billion in wealth was transferred from retail investors to institutions in the past year, according to consultancy Vesparum Capital.


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In a research paper released today, the company said only $5 billion of the $38 billion in capital raised during the pandemic went to retail investors.

The major factor was companies that raised capital had a far greater allocation for institutions than they did for retail investors. However, a typical Australian share register has a retail allocation of about 40 per cent.

“And only $2.7 billion of the $15.7 billion increase in portfolio values due to capital raising allocations was attained by retail investors,” managing director Timothy Toner said.

The disparity wasn’t because of a lack of interest from retail investors, who showed strong on-market support around capital raisings.

“Our data shows that retail investors were short changed to the tune of $3.6 billion as the result of inequitable capital raising structures and allocations.

“Companies are increasingly taking advantage of the strong market recovery and subdued volatility levels to pursue opportunistic mergers and acquisitions, which we expect will drive strong equity capital markets activity in 2021.

“In particular, we expect to see companies in the technology, healthcare and consumer sectors looking for opportunities to leverage their relatively high market valuations.”

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