Glad you’re pointing out the existence of “chairman’s list” in connection with Tattersall’s. I have always reckoned they are grossly unfair, even if I have profited myself from being included.

One IPO I was in was one of the hardest to get on board (a large gambling company). There were three different coloured application forms. One for the instos, one for the public and one for mates. I was rung up on a Sunday by the underwriters asking how I got the “mates’ form.” I told them: “from the family.” No probs – got my fill (100%) as did my mum. Most of the public missed out.

What I really found a bit iffy was the presence of so many executives from the senior ranks of the underwriters (as if it wasn’t already churning out millionaires from the factory). Similar suspicions more recently with the Babcock & Brown IPO. That IPO has given me a profit to date of some 2000% so I shouldn’t complain. But it is wrong.

Stephen Mayne writes:

I spent two hours with one of Australia’s top fund managers this week and he identified the “corruption of floats and placements” as the untold scandal of Australian financial markets. With big underwriters such as UBS now also taking large stakes in hedge funds, how on earth do you police the share allocations when placements are done at a discount or floats are tipped to come on at a big premium.

Having been a regular trader over the years, I received numerous allocations of shares from my regular broker in floats such as HIH, Telstra, CBA, National Mutual, Austin Group, CPH Investments, Optus and various others. In 1997, the Herald Sun exposed Macquarie Bank and UBS for scooping up tens of millions of dollars worth of shares in Transurban at the expense of their clients. I tried becoming a client of Macquarie and didn’t get offered a float over almost two years.

Twice I’ve raised this issue with Macquarie chairman David Clarke at the annual meeting and we’ll do it again next week in Sydney.

However, there were a couple of occasions when I used “connections” to queue jump on to the priority list. The first was the Seven Network float when I lent $14,000 to a television reporter to buy 7,000 shares at $2 each as a staff member. Staff usually get preference in floats and the shares were then transferred into my name and I gave the political correspondent a $500 commission on my estimated $4,000 paper profit.

The other one was the float of advertising and media company Shomega in 1993 after the Sidwell family’s business had just bought Disctronics off the Victorian Government’s failed merchant bank Tricontinental for about $50 million.

The underwriter was Hambros Corporate Advisory and its director David Williams told me he thought the $1 shares would come on at $1.50. Jeff Kennett’s advertising director Peter Bennett had some connections with the business and told me how to get an allocation of shares from the “priority list.”

I duly wrote out a cheque for about $15,000 and took a taxi down to Port Melbourne to drop it off personally with the person handling the mates. I was Peter Bennett’s mate and, lo and behold, I got the full whack and they debuted at $1.27, giving me a paper profit of $4,005.

It’s not right, but it happens. If you’ve got a tale of preferential allocations or a confession of your own to make, drop a line to [email protected].

Peter Fray

Get your first 12 weeks of Crikey for $12.

Without subscribers, Crikey can’t do what it does. Fortunately, our support base is growing.

Every day, Crikey aims to bring new and challenging insights into politics, business, national affairs, media and society. We lift up the rocks that other news media largely ignore. Without your support, more of those rocks – and the secrets beneath them — will remain lodged in the dirt.

Join today and get your first 12 weeks of Crikey for just $12.

 

Peter Fray
Editor-in-chief of Crikey

JOIN NOW