@Remorhaz the issues that go through my mind are 1. portfolio position now, 2. what has changed, 3. Would you add at 13.25, remember there is a slight dilution around 4%.

The additional news is obviously the UK expansion, will this add value? how much? potentially positive but early days are my conclusion

putting together my existing position, plus discount offered and dilution occurring and value at $13.25. i am thinking of adding around 10% to my holding, at this stage

I hope and expect $NCK to consider pre-existing position size in any scale-back.

In very round numbers, 3.5 million new shares were issued to Instos. That's +4.3% of total shares on issue.

Anthony has signed up for $4 million via the Conditional Offer, or 0.3m shares. His current holding is 6.4 million, so he is buying +4.7%

However, as @Karmast has written, retail shareholders own >50% of shares, so overall we stand to get diluted.

Like others, I expect this to be oversubscribed, potentially significatly. In the report on the results of the Institutional Placement, it was stressed that existing Instos who participated were not diluted.

So, Instos not diluted, Anthony not diluted. But retail holders likely to be diluted.

Given that we are likely to be diluted, I would expect there to be some recognition of a retailer shareholder's pre-existing holding in their allocation. An arbitrary allocation or a scaleback based on the size of the application rather than the size of the holding would seem unfair and at least inconsistent with the treatment of Anthony and of Instos.

Anyway, I have followed @Karmast's lead and written to $NCK to request that the Board exercise its discretion and not dilute retail holders. One email on its own means nothing,... but if there are lots.????

To send an email I used the contact form, as I can't find an email for investor relations or Company Secretary. https://www.nickscali.com.au/contact/

So, I am going to apply for +40% of my existing holding, because that is what I want. But I don't expect to get that amount.

My logic is that I have been waiting for an opportunity to increase my RL holding of $NCK, and this gives me an opportunity at an attractive price. In doing so, I am not assigning any value to the UK move, that is yet to be proven, but I want to back management.

The scale-back will be what it will be and I only hope (and expect) that it takes account of my existing holding. I am expecting to only be able to increse my position by 2-4%, which is better than 0%. In the event that the SP falls back closer to $13.25 (say, sub-$14.00), then I will buy more on market.

That's my logic.

@mikebrisy i did get a reply from the company stating that retail shareholders were 31% and that they would pass on to the Board the request to consider increasing the cap and not to treat or dilute retail shareholders unfairly. Fingers crossed and thanks for also writing to them.

I understand the dilution argument, however if NCK expand the SPP cap from $10m to $22.5m to allow their retail shareholders equal access to the CR (the total raising would then be $72.5m [$46m Insto + $4m AS + $22.5m retail SPP] and 31% of that would be $22.5m - and 31% of their shareholders are retail shareholders) then what do they do with the extra $12.5m? Increase their full year dividend? Keep it in the bank? I guess it never hurts to have spare cash, as long as they don't just pay it back in August/September as an increased dividend.

I guess I've never really expected to maintain my percentage shareholding during capital raises being such a small fish in such a large ocean; I'm more focused on whether the EPS improves because I want the shares I do hold plus any further shares that I buy to be worth more in the future regardless of whether someone else was able to buy more shares at a cheaper price than I was. My take on that is similar to watching PME just keep rising while I don't hold any in my real money portfolios, good luck to them, however I'm more focused on what's happening with the value of what I hold, regardless of whether someone else is getting a better ride or a bigger discount. I just work out the rules and try to play the game as best I can, rather than worrying if the rules are fair to everybody. I'd be more concerned if I was setting those rules myself, but since I'm not, I try to look past it, because in my experience the playing field in investing is rarely level.

@Bear77 I agree you have to play the cards you’re dealt and make a balanced call. But that doesn’t mean we shouldn’t speak up and advocate for a genuinely fair go. Especially given NCK brought in new institutional shareholders in the placement who hadn’t been invested in the business like we are the day before.

Fair enough @Karmast - and I do genuinely respect the efforts and the reasoning behind it, and thinking about it, perhaps it's more worth it with smaller companies that might be more receptive to retail shareholders than Australia's largest companies who probably don't care too much what we think because they've got enough institutional backing anyway. NCK is what I would call a mid-sized company; with a market cap of around $1.2 billion, they're too big to be a microcap, and not big enough to be a large cap, so are either a small-cap or more likely a mid-cap company, however they do have good management, who think like business owners, so perhaps they would be receptive to these sort of requests.

Once a company gets too big, especially ASX-20 companies, my thoughts are that these sort of approaches are akin to yelling at clouds, however NCK are perhaps not big enough to not care what retail shareholders think, i.e. they are small enough to probably still care, so hopefully they listen. I've sent my own email to them this morning (using the "contact us" form on their website requesting that they raise the cap on the SPP and also consider scaling back - if a scale-back is required - based on what each shareholder held prior to the SPP with those holding less than $500 worth of shares getting nothing in the SPP allocation as they are not serious backers of the company.

Got an answer already:

And it's Saturday afternoon... Wow.

@Bear77 Agreed on the really large cap vs smaller companies reality in these situations. And hopefully the NCK shareholders here like you, @mikebrisy and myself that have sent their feedback to the company will have an impact. Will wait and see. I was very impressed with how they (and Anthony in particular) engaged and listened to retail shareholders at the AGM last year, so fingers crossed.

@Karmast What are the reasons companies don't use pro rata rights issues as a default way to raise capital on the ASX compared to placement/SPP? Is it the speed, cost and/or control over the amount raised that is seen as a greater benefit than being fair to all current shareholders?

My opinion on that is that non-renounceable rights issues are fairer but they have two disadvantages for companies, (a) unless the rights are listed and tradeable on the exchange, they rarely raise the required amount because there are so many shareholders who take no action or aren't interested, and secondly (b), they do cost more, and significantly more if the rights are listed and tradeable. That said, if a rights issue is fully underwritten, then it would raise the required capital, and then it just comes down to the higher cost versus an SPP.

@Dominator The cynic might say because they have brokers or merchant bankers telling them not to worry about us small guys...that they can raise all the money the company wants with the big guys in 24 hours, for a modest fee of course. A PAITREO raising is the fairest for all, where all shareholders get compensated whether they participate or not but these are more work and more costly to the company than an SPP. That said the likes of Sydney Airport, Aristocrat and ANZ have all done them in recent years and I'm sure their shareholders appreciated it!

09-May-2024: Nick-Scali-Completion-of-UK-Acquisition.PDF

The SPP is scheduled to close on Wednesday 22nd May (at 5pm, Sydney time), with the SPP results announced the following Wednesday (29th May), and the SPP shares are scheduled to commence trading on the following day (Thursday 30th May). Holding statements to be mailed out on that day also.

That is an indicative timetable only, and subject to change as per page 2 of their Announcement-and-Share-Purchase-Plan-Booklet.PDF - I've reproduced that timetable below:

---

I've sent in my $30K for my full entitlement, in 2 x lots of $15K due to a $20K/day BPay limit on my bank accounts - I've done that before - payments via BPay on subsequent days - and it's worked out OK on prior occasions - they add the payments up before calculating the allocation. As I've said, I do expect that there's a better than even chance that this SPP gets scaled back; we shall see.

There's also a chance it closes early due to already being oversubscribed, but I doubt it - I would expect it to close as scheduled on Wednesday May 22nd - however I thought I'd get my money in nice and early just in case. Even if the NCK share price drops below the $13.25/share SPP offer price during the next fortnight, which I think is unlikely, I wouldn't be too fussed about that - they're worth over $13.25/share anyway IMO.

Still can't get over that Fabb Furniture purchase price: Two English Pounds + their 3.5 million pounds of secured debt. Even though the company (Fabb) is clearly on its knees to be selling at that price, that's an absolute bargain for an established store network that NCK can use to establish a decent starting footprint in the UK.

@Bear77 I think Anthony must have pinched himself to see if he was dreaming when he found Fabb.

Finding good space to open your business and expand might be an issue in Australia, but in the UK it is even more difficult.

Some of the commentary has focused on relative discretionary spend, and the fact that the average Aussie spends so much more on furniture than the average Brit. True. But you've hit the nail on the head. Picking up a perfectly sized UK starter pack for the cost of the debt - that's the kind of opportunity you can only dream of. All of those lease negotiations avoided. Its amazing.

Now that said, I've only reviewed some of the sites. Overall, they appear to be reasonable second tier retail parks, e.g., North Quay Lowestoft Retail Park is OK, (if you have to live there). But the point is, he has a starter pack, within which a brand uplift can be self-sustaining, and which gives the option value of building out once they have an on-the-ground appreciation of the market. The timing is likely to prove perfect too. UK is in the depths of the trough, and the timing could be perfect as we face the next phase of the cycle.

I have a lot of family and friends in the UK. Its tired. Morale is low. Everyone is feeling s***. The Tory government is going to get their arses handed to them on a platter.

I think a fresh brand in upper/mid-range furniture will be well-received. Nick Scali - wow, even sounds Italian. And in the UK "everyone" knows Italians make the best furniture. (OK, we'll tolerate you for being Aussies, coz you do make good wine after all, and you can play cricket...even if you cheat all the time.)

I don't think you can ask for better than that in business.

Off to cut my own cheque .... thanks for the reminder!

Disc: Held ... and hoping for more

Spot on @mikebrisy and love the second order thinking on how this can play out. As well as your insightful views on how the Brits see us downunder!

Thursday 23-May-2024: NCK's SPP closed yesterday, no doubt heavily oversubscribed - whether they accept more than the $10m that the SPP was targeting is up to them - and we'll have to wait and see which way they go with that, and if they scale back applications (which is a fairly strong probability IMO) the way they scale back those applications is also something we are keen to find out - but we will likely have to wait a whole week for that because they aren't scheduled to release the SPP Results until next Wednesday, the 29th May, with the new shares to be issued on that day and to be tradable on the following day, Thursday 30th May.

Wednesday (yesterday, i.e. the day the SPP officially closed) was the first day that NCK has closed below $14/share since they announced this deal and the CR priced at $13.25/share. They've been as high as $16.03 intraday on the 26th April (the day they resumed trading after the deal was announced) and as low as $13.90, which was their closing price yesterday, being the lowest they've been in 4 weeks, so you'd expect an SPP priced at $13.25/share would have received STRONG support from shareholders.

The dates I've given there are indicative only, as provided by NCK in their announcements, and are of course subject to change if they choose to change them, so they MIGHT announce the results early, but if we hear nothing until Wednesday of next week, that's just them sticking to their indicative published schedule, so no need for concern.

As I said earlier, I did apply for my full $30K entitlement. I expect to be scaled back, but would be pleasantly surprised if I'm not.

Fingers crossed - I know they received multiple submissions from shareholders not to scale back.

On the money as always @Bear77 a price around $16 shouldn't be a challenge for NCK. What has held me off is your point about pull backs and also the fact I see retail heading into a purple patch (more so than currently).

Price pull backs are common as you point out and the current price isn't a full-blown pull back. The Acquistion looks good and management is great, but that will be proved over several years, and in between now and then the market will have doubts and I am looking for a price around $10 to buy in - possibly in the face of bad news but with a long-term view.

What I am surprised about currently is the general strength of retail stocks, admittedly the below chart is almost entirely WES, but in general retail stocks are solid even if some are down on March highs:

S&P/ASX 200 Retailing Index (AXRTJD) - Investing.com AU

I am just waiting for everyone to realise we ARE in a RECESSION. Masking a per capita recession it with immigration I admit does help retail (more people need stuff even if on average each person is buying less it's still higher sales), but the housing crisis (a justified term in this case) has no quick fix and immigration is pulling back. Tax cuts may help a little along with excessive government spending, but the RBA is just going to delay interest rate cuts as a response to make the whole thing a wash!

So if I held NCK I would be happy continuing to hold long term, but new money needs and can get a better price in my view.