It’s no wonder Macquarie Bank is finding it
hard to get away the float of Hastie Group, Australia’s largest air
conditiong group. To many investors, especially after yesterday’s sharp
market fall, Hastie is a very ‘uncool’ investment.

To put it in
stockmarket terms, it’s over-priced and the numbers are a bit
speculative because the company operates extensively in the building
industry and that’s suddenly a big unknown. But there are also things
about the company and the way it’s being floated that have made
investors wary of the original $2 share price. That’s now down to $1.60
and could hit $1.50 today. Quite a humiliation for the mob at the
Millionaires Factory.

Michael Pascoe revealed the most worrying point on Seven’s Sunday Sunrise last Sunday when he ploughed through the prospectus to discover a lack of transparency about a couple of important points.

Equity Group Management is running the float which had aimed to raise
$186 million. That’s now down around $140 million and falling,
according to the market.

Here’s the Hastie prospectus and a close reading will find little information on just how much the company will be retaining of the planned $186 million.

found that in the fine print in the Second Section, it said “a portion”
of the gross proceeds would be used to fund the purchase of the vast
majority shares from existing shareholders. But what portion? Nowhere
in the big print was that detailed, but buried, on Page 72 in the fine
print of the internet version was the news that the listed company
would keep just $27.5 million of that $186 million. In other words the
existing shareholders would grab 80% of the money raised, or around
$150 million.

So who are these shareholders? Well, that’s also a
bit unclear from the prospectus, but it seems it’s the management,
including CEO Jeremy Maycock, the former chairman and founder David
Martin, and the 60% shareholder, the RMB investment bank and private
equity group, which is part of the big South African investment bank,
First Rand.

Now that the offer price is tanking, the take by
the original shareholders will have to fall because the $27.6 million
to be retained by the company is stated in the prospectus and to reduce
that would undermine the credibility of the financial accounts for the
listed company. Likewise figures for the planned goodwill of a massive
$151.8 million after the float and net debt of $29 million.

The selling shareholders will have to lower their expectations or postpone or pull the float.

is on a 3% fee based on the $186 million target, with up to another 1%
to be paid at the directors’ discretion. I reckon they will be working
hard to get their money. An announcement is expected today.