Crikey

The funny trading continues on the ASX, and no one seems to care.

This morning Funtastic, a Melbourne based toy wholesaler with a tottering balance sheet and a buyout bid that’s been looking a bit ropey, asked for its shares to be suspended.

Yesterday Funtastic (FUN) shares opened at 55c after closing at 60c on Wednesday and then fell to a low of 46.5c before closing at 49c, a fall of 18% with turnover of around five times the normal amount. They traded up half a cent to 49.5 cents before the suspension was made.

Funtastic has been in talks with a consortium led by private equity group Archer Capital about a possible takeover. The consortium in May made a non-binding indicative offer of 80 cents a share, valuing the company at $132 million. At Thursday’s close of 49 cents, the company is valued at $81 million. Oops!

Unless Archer Capital is a charity, the takeout won’t happen at 80 cents, not with the shares under 50 cents. Private Equity groups are usually not a charity, except CVC, with paid James Packer billions for a faltering PBL Media.

This morning came the request for a suspension from the company.

“Further to our telephone discussion this morning, Funtastic requests a trading halt in the Company’s securities pending the release of an announcement by it regarding the status of its discussions with the Archer consortium on a possible change of control transaction.”

Seeing FUN said on August 8 (last Friday) that discussions were continuing, you’d be entitled to think that something was afoot, seeing how easy it would be to announce that the deal was still on, or off. Why the fall in price and why such a disinterested reply to a Crikey reader who sent a letter of complaint to the ASX surveillance department about the unexplained move in the FUN share price?

Thank you for your email regarding price queries.

There is no set rule as to when ASX will query a company regarding a
price rise or a price fall. Every stock is treated on a case by case
basis, depending on whether there have been any company announcements,
broker research reports, media stories, etc which may explain the price
move.

For your information the following may help you understand where a price
query comes from. ASX has in place an alerting system called SMARTS
(Securities Market Automated Research Trading and Surveillance). It is
designed to identify unusual trading which may indicate an uninformed
market, possible market manipulation or insider trading. Alerts are
usually triggered by unusual price or volume movements. Generally, most
alerts turn out to be explainable.

Where an alert, or a series of alerts, cannot be explained by publicly
available information such as company announcements; stockbroker
research or media articles, (or current industry/market conditions), ASX
may seek a possible explanation from the company itself. This may be in
the form of an ASX Query regarding an increase/decrease in their share
price and/or an increase in volume during the period in which the
unusual price and/or volume movements occurred. ASX may question the
Company about the share price change and/or may ask them to comment on
recent media speculation (if it has the potential to materially effect
the share price). The company’s response is generally released to the
market even though it may not have any explanation. Please refer to this
link for more information:

Please also note, that ASX may also contact the Company directly to
question whether there is any information that needs to be announced or
whether they are aware of the reasons (that ASX is not aware) that has
caused the price movement. ASX will query a Company where it is deemed
appropriate when there is no information that could explain the price
and/or volume movement. It is not merely a random query by ASX. In other
instances, ASX will ring the Company requesting them to update ASX
formally (via an announcement).

And in The Sydney Morning Herald a story that claimed that ‘Reform’ had been forced on the ASX over market surveillance:

The Australian Securities Exchange has been forced to make unwanted changes in its handling of conflict-of-interest issues in the wake of its role as a market operator during the height of the subprime turmoil and the Tricom and Opes Prime debacles. But the Australian Securities and Investments Commission has largely approved the ASX’s performance for the year, prompting criticism that serious issues remain unexamined.

They have to be joking; clearly ASIC has been missing quite a bit, as has the ASX.