REDC anchor investor buys secondary share stake

Repower Energy Development [REDC 7.40 ?1.9%] [link] recently disclosed that its IPO anchor investor, TOKAI Corporation, purchased an additional 65.1 million REDC shares at ?7.47/share to double its stake in REDC to 20.1%. The company issued a clarification yesterday to say that the shares TOKAI acquired were purchased from REDC’s parent company, Pure Energy Holdings (PEH), and not directly from REDC. This means that the ?486 million that TOKAI paid will go to PEH, not to REDC. The company did note, however, that PEH is “committed to the advancement of REDC’s renewable energy projects”, and as such, will provide “capital infusion, advances and/or lending its credit... to enable REDC to pursue more projects.”

MB BOTTOM-LINE: This transaction highlights the important differences between primary (new) and secondary (pre-owned) shares. In this case, had TOKAI purchased the stake in primary shares from REDC, then REDC would have had to issue new shares to TOKAI and the ?486 million would go directly to REDC’s bank account, for direct use on things that could benefit other REDC shareholders both now and in the future. Instead, by buying secondary shares from REDC’s parent company, no new shares are created, the shares are just transferred from PEH to TOKAI, and the cash goes directly to PEH.  

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