iCar Asia Ltd earns black mark

iCar Asia Ltd (ASX:ICQ) risks the wrath of retail shareholders with placement

Mike King

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Published July 1, 2015 1:13 pm AEST

Congratulations iCar Asia Ltd (ASX: ICQ), you've joined the list of companies unfairly treating your retail shareholders.

Thanks to your placement announced today, existing and new institutional investors will be offered shares in the company at a discounted price of 65 cents (the current price is 70.5 cents). iCar plans to raise between $10 and $15 million, to be used for capital expenditure, marketing and expand its headcount on sales and account management teams.

Retail shareholders have been left out in the cold, with no announced Share Purchase Plan (SPP).** On July 3, iCar Asia announced a 1 for 44 rights issue.

We make this point over and over, but when companies don't require the cash immediately, we would much prefer that companies conduct a pro-rata renounceable rights issue, which excludes investors who don't already own shares in the company. Why should institutions who haven't bothered to own a part of the company before today be offered a chance to jump in at discounted prices, especially when iCar Asia's existing retail shareholders are excluded?

We suspect that the board of iCar Asia and its investment banking advisors think they are doing the right thing, but treating some shareholders 'more equally' than others is as wrong as it sounds.

Companies and their boards need to be very careful how they treat retail shareholders. The army of self-managed super funds is growing, and retail investors will likely own larger portions of ASX-listed companies in their own right in future, rather than through ineffectual fund managers. There may come a time when directors and boards face getting turfed out for unfair treatment of their smaller shareholders, and I remind all boards that they are there to look after all shareholders, not just their big institutional investors.

We call on the board and management of iCar Asia to at least consider offering a share purchase plan to existing retail shareholders as a token.

** CEO Damon Reilly advised us on July 2 that in fact iCar Asia would be offering shareholders a chance to participate. As he stated, "We highly value our retail supporters of the stock and it has been an intentional decision by the board to reward our retail investors with what (in my opinion) is a great opportunity to top up in ICQ."

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