Share Purchase Plans-Low Risk Strategy in Volatile Times

In the current market environment many investors are turning to Share Purchase Plans (SPPs) as a smart way to purchase shares at discounted prices. Share Purchase Plans are also increasingly popular with companies wishing to raise capital quickly, as there is no requirement to issue a prospectus.

Qantas, BlueScope Steel, Crown Casinos, Newcrest Mining and Tabcorp are among more than 30 companies to have issued Share Purchase Plans already this year, and many more are likely to follow.

When a Share Purchase Plan is announced a company offers existing shareholders the opportunity to purchase up to $5,000 worth of shares at a discounted price. This $5,000 limit can be higher for individual companies, subject to ASIC approval. This limit is under review and ASIC has proposed raising the limit to $15,000.

By purchasing the shares at a discount of between 5 – 20% off the market price investors are insulated against further falls in the share price that may occur. This consequently makes SPPs a low risk strategy and if the shares are sold quickly investors can see a small return in a short period of time.

Unlike a rights issue, where the number of shares allocated depends on the number of shares that are held, the shareholder in this case is able to participate up to the maximum even if they own only one share in the company.

Damian Isbister, Chief Operating Officer of MDS Financial said that with investors looking for new ways to be profitable in this difficult market environment, “we are pleased to announce that details and reviews of all upcoming Share Purchase Plans will be made available on our blog at http://blog.mdsfinancial.com.au/share-purchase-plans-spp/ as they are announced to the market. We will continue to provide tools and education to our clients that allow them to prosper in these difficult market conditions.”

The latest companies to announce Share Purchase Plans are Cardno and Lihir Gold.