Platinum Capital’s Bold Scheme to Convert Shares into ETF Units: Will Shareholders Approve?

Background and Rationale

Platinum Capital Limited (ASX, PMC) has proposed a significant restructure designed to tackle a long-standing issue, its shares have persistently traded at a discount to their net tangible asset value (NTA). To address this, the company is seeking shareholder approval for a scheme of arrangement under which shareholders would exchange their existing shares for units in the Platinum International Fund Complex ETF (ASX, PIXX).

The PIXX ETF is an open-ended, Australian registered managed investment scheme that primarily invests in the Platinum International Fund, an unlisted fund managed by Platinum Investment Management Limited. This structure is expected to provide shareholders with improved liquidity and pricing transparency, as quoted managed funds like PIXX typically trade close to their net asset value (NAV), supported by a market maker.

Scheme Details and Consideration

The scheme consideration will be calculated based on the ratio of PMC’s post-tax NTA to PIXX’s NAV at a valuation date close to the scheme’s implementation, currently expected to be 22 August 2025. Shareholders will receive a number of PIXX units proportional to their shareholding multiplied by this ratio. This approach aims to ensure that shareholders receive units with an aggregate value closely aligned to the underlying value of their shares.

Additionally, the Board has indicated an intention to pay a partly franked special dividend equal to the company’s retained earnings at the valuation date, subject to conditions and Board discretion. This dividend would be paid shortly after the scheme’s implementation, providing an immediate return to shareholders.

Support and Opposition

The scheme has received a favorable assessment from BDO Corporate Finance Australia Pty Ltd, the independent expert appointed to review the proposal. Their report concludes that the scheme is fair and reasonable and in the best interests of shareholders, in the absence of a superior proposal. The company’s independent directors unanimously recommend shareholders vote in favor of the scheme.

However, a substantial shareholder group led by L1 Capital, which holds approximately 16.85% of PMC’s shares, has publicly declared its intention to vote against the scheme. This opposition introduces uncertainty, given the scheme’s high voting thresholds, approval requires at least 75% of votes cast and a majority of shareholders voting in favor.

Contingency Plan, On-Market Buy-Back

Recognizing the risk that the scheme may not be approved, the Board has convened a separate general meeting to seek shareholder approval for an on-market buy-back of up to 50% of the company’s shares. This buy-back would provide a liquidity mechanism for shareholders wishing to exit their investment closer to NTA if the scheme fails. The buy-back price would be limited to no more than 5% above the volume weighted average price over the preceding five days, potentially resulting in purchases below NTA in a declining market.

The buy-back is conditional on the scheme not proceeding and requires shareholder approval at the upcoming general meeting scheduled for 12 August 2025, following the scheme meeting. The Board recommends shareholders support this resolution as a fallback liquidity option.

Implications and Next Steps

If approved, the scheme will result in PMC becoming a wholly owned subsidiary of the PIXX ETF, with its shares delisted from the ASX. The company’s investment portfolio will be transferred to the underlying Platinum International Fund and managed under the same global equity strategy. Shareholders will transition to unitholders in the ETF, gaining the ability to trade units on the ASX AQUA market with pricing generally closer to NAV and enhanced liquidity.

Shareholders should carefully consider the tax implications of the scheme and the special dividend, which may vary depending on individual circumstances. The Board encourages shareholders to read the full scheme booklet and independent expert report before voting.

Market participants and investors will be closely watching the shareholder vote and subsequent court approval, as the outcome will have material implications for PMC’s capital structure, liquidity, and shareholder value. Should the scheme fail, the company’s alternative liquidity plan will be a key focus.