Tricom managing director Lance Rosenberg has every reason to be upset with the regulators and media today, but his firm’s fall from grace provides an abject lesson in reputational risk management and public relations.
We finally got a statement out of Tricom today which clarified the situation but it is probably too late given the excessive front page treatment dolled out by The Australian, plus a Terry McCrann column pronouncing the firm to be dead.
Stand by for the run on Tricom’s six funds. Given that Centro and MFS have both frozen redemptions, any bad media is likely to generate a flood of redemptions, not dissimilar to what Mark Westfield’s Four Corners story did to National Mutual in 1992.
Tricom’s bunker mentality certainly hasn’t helped. The front page of its website has a “news” button, but the only story is from April last year detailing the move to a new head office.
The fact appears to be as follows:
A group of Allco executive signed over some stock to Tricom and drew down a $60 million loan. Tricom then lent this stock to a hedge fund through ANZ Nominees which duly shorted Allco Finance Group, thereby sending the shares south and triggering the margin call.
Tricom then outraged the Allco executives by selling 21.9 million shares to Allco founder John Kinghorn without the required five days notice and then ANZ failed to deliver the stock back to Tricom in time for settlement.
Alan Kohler wrote the following on Business Spectator this morning:
So while one part of ANZ was failing to deliver stock for settlement, another part was refusing to cough up the overdraft to cover the shortfall with cash. Separately neither action by the bank was particularly unusual or out of line; together they were utterly disastrous.
If Tricom was simply a victim of the ANZ’s bureaucratic bungling it has been harshly dealt with by all concerned.
Robert Gottliebsen, who turns 67 next week, has also weighed in with a very strong comment on Business Spectator condemning everyone from Tricom, the ASX, bankers and even “youngsters” who were given too much authority.
Given that Gottie worked for the last broker which failed to settle, Patrick Partners during the Whitlam years, perhaps he could explain the difference between Tricom’s ANZ-inspired administrative troubles and his old firm which actually did go broke.
That said, the whole saga should once again trigger a debate about the untenable conflicts the ASX faces as a for-profit monopoly which doubles as a regulator.
Most importantly for Tricom, its loan book is down from $2.6 billion in July to just $950 million and the security is $1.3 billion even after the recent market falls, so it really should be business as usual.