On 28th Sep 2020 Frasers Centrepoint Trust announced another equity fund raising to raise approximately S$1.33 billion to part-finance the acquisition of the remaining 63.1% stake in PGIM Asia Retail Fund. The equity fund raising comprised on a private placement at $2.35 per unit thereby raising S$575 million. A preferential offering for existing unitholder of 290 unit for every 1000 unit at an issue price of S$2.34 raising S$759 million. As an unitholder since 2016, I was eligible for the preferential offering. So is it a no brainer and just jump in to take up the offer ?
Unfortunately, the answer is NO. I did a check as in May 2019, they also did an equity fund raising of private placement and preferential offering to raise S$421 million to acquire a 33.33% interest in Waterway point. The private placement price was S$2.382/unit while the preferential offering was S$2.35/unit. Almost same preferential offering price for 2 consecutive years ! Maybe other investors have short term memory but definitely not me. The deal this time round doesn't make sense at all to me. Should I take up the offer this time round, I will have 50% of my overall holding price at S$2.34 to S$2.35, that is definitely not a cheap price for me to buy for this reit. Hence, I decided to skip this preferential offering.
Will my existing holding get very much diluted if I don't subscribe to it since this time the equity fund raising is like almost 3x that in 2019 ? Probably yes as I can't be bother to really look into great detail, punch my calculator to figure out. Instead, I adopted strategy that learned from 孙子兵法, the 奇兵 concept that I have been using since 2015. The amount of units which I supposed to get if I took up the right issue I decided to acquire it at $0 cost. Don't pay a single cent, not get diluted away and the very best it just bring down my holding price further.
Since the launch of the equity fund raising in Sep 2020 till now, I have earned 50% of the supposed units at $0 cost (refer here). As such, my holding price has reduced from S$1.9021/unit to S$1.7902/unit and to S$1.6908/unit. The remaining 50% of the supposed units I will continue to wait for opportunity to complete it. Should I complete acquire the remaining 50%, my holding price will eventually reduce to S$1.5217/unit, a price last seen in Dec 2009.
