A few months ago, Crikey questioned the IPO of listed property manager,
Run Corp. Of particular concern for investors was the fact that Run
spent a staggering $6 million on legal and advisory fees when it was
only raising $25 million in the float. Of further worry was the fact
that Run’s forecast earnings were quoted in the misleading EBITA form –
rather than net profit.

it turns out, investors would have been wise running from Run, which has since
seen its share price pummelled from $1.00 to only 33 cents (in the space of less
than five months). The reason for the sudden drop was due to Run announcing an
EBITDA loss of $6.85 million for the upcoming year (as opposed to a prospectus
forecast loss of only $2.2 million).

an announcement to the ASX, Run conceded that the massive loss was due

  • higher than expected staffing levels due to an “unprecedented and unexpected
    number of tenant enquiries”;
  • the
    decision by the company to “slow down the acquisition of further rent rolls”;
  • the
    “removal of inactive properties from agency

other words, Run management totally failed to understand the business they were
entering into (and therefore, grossly under-budgeted staffing levels),
overestimated potential revenue they would earn and used shareholders’ funds to
buy a bunch of dud assets. This seems to contrast with Run’s prospectus which
hailed Run’s “strong board and management team with a broad range of skills and
expertise covering the property industry [and] public company stewardship and

performance would no doubt be deeply embarrassing to its chairman,
Homeside hero, Frank Cicutto. Although in fairness to Cicutto, he should be
allowed some time to adjust to working in a company that is in a massively
competitive marketplace. Frank never had such problems when he was CEO of NAB,
which was nestled in a cosy oligopoly and could just increase fees whenever profit
looked like coming in a little low.

any sort of silver lining can be drawn from the whole fiasco it is that at least
the directors of Run won’t be facing any claims of insider trading. They may
however, be guilty of having absolutely no idea what is going on – during the
past month, four Run board members (including Cicutto) actually bought Run
shares for more than 80 cents.