Taking stock – just not for little guys

About a third of the shares not taken up by Ruralco's existing 3900 retail shareholders were diverted to big investment institutions last week after institutional groups had earlier picked up about 62 per cent of the total offer for $3 a share.

Ruralco, which has had its share price surge as high as $3.35 in the past week, launched its capital raising after buying national water equipment retail and advisory business Total Eden for $57.4m last month.

The ASA said the decision to sideline mum and dad in- vestors who had been loyal to the expanding and strategic farm sector player was un- fairly diluting the significance of the company's smaller stakeholders.

It said the two million shares (worth about $5.9m) not acquired by some small investors entitled to the offer (one share for every 4.3 they already owned) should have been offered back to other individual shareholders who had shown interest in building their stake.

This would have helped maintain the balance between smaller and institutional investor holdings.

ASA chairman Ian Curry said Ruralco, acting on advice of global banking group UBS, had joined an increasing sharemarket trend whereby big investor groups were enjoying preferential treatment and diluting the influence of retail shareholders in listed companies.

He noted Virgin Australia - also under UBS advice - recently diverted almost 75pc of retail share entitlements to other airlines, Etihad, Air New Zealand and Singapore Airlines, which hold large stakes in Virgin, rather than re-offering unsubscribed retail shares to mum and dad shareholders.

"For various reasons Amcor has lost about 40,000 retail shareholders from its books in the past two years; Toll Holdings lost 20,000 to 30,000 - we see this dilution trend as a worrying issue," Mr Curry said.

Ruralco managing director John Maher admitted "we probably could have done things differently".

"We simply followed UBS's advice," he said.

"We want to increase our liquidity and have been fortunate to have two well-supported capital raisings in the space of a few months but we might do things a bit differently next time."

Meanwhile, the strong institutional interest shown in Ruralco's capital raising efforts has extended to another expanding agricultural business, Tandou, which last week launched its own $25.5m share offer.

The far western NSW irrigated cropping, water trading and pastoral company is raising funds to pay for its recent $24.8m purchase of water entitlements (34,585 megalitres) and last year's "South Farm" purchase from the Ravensworth aggregation west of Hay, bought for about $8.4m.

Chief executive Guy Kingwill said he was delighted the capital raising was quickly and fully underwritten at a relatively strong price (47 cents/share).

He said Tandou's retail shareholder base was not significant, but the smaller investor stake in the company "would not be going backwards".

Tandou has a number of large family-based shareholder groups including the Sydney-based Parsons family's PF Agriculture, while larger investors include new Zealand-based Rural Equities Limited.

Until last year the corporate raider, Guinness Peat Group, was a significant shareholder.

Tandou's share offer gives eligible retail and institutional shareholders the chance to buy three new ordinary shares for every eight shares they hold on March 28.

Tandou recently reported an upbeat half-year profit of $3.4m, boosted by a big cotton crop in 2013, and particularly the sale of cottonseed into the dairy and drought fodder markets.

Earnings before tax of $3.447m to December 31 were up 32pc on the the $2.6m reported for December 2012.