Shares in property giant GPT have now fallen for a fourth straight day and it’s clear that chairman Peter Joseph and CEO Nic Lyons have to go.
As a chairman, you just can’t stand up at an AGM a couple of months ago and make comments like this:
This year like last GPT will generate over $600 million in net operating cash flow which will be distributed to you our owners. In 2004 before GPT became independent the figure was $440 million. That translates to a 30 per cent uplift in distributions from 22 cents per security to 28.9 cents per security in three years.
And then turn around two months later and say woe is me, we’re actually only going to make $464 million, as $169 million has disappeared in the space of 10 weeks.
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The GPT share route appears to have ended this morning when the stock bottomed at $1.57, but by midday it was still 8c weaker for the day at $1.65 and down 33% over the past four days.
GPT claims to have $14 billion in assets and only $4.5 billion in debt yet the market is now valuing the equity at just $3.63 billion. That’s called a huge credibility discount which can only be fixed by a takeover or sweeping board and management changes.
Given the stench surrounding the Babcock & Brown joint venture where GPT’s $2 billion in equity may be worthless, Elizabeth Nosworthy and Ian Martin can’t remain common directors of both businesses. Nosworthy in particular should go given her woeful record as chairman of Commander Communication and the fact her association with GPT stretches back 16 years.
However, neither Martin or Nosworthy were involved in the Babcock joint venture decision which was driven by a three man internal GPT board committee comprising Peter Joseph, Boral chairman Ken Moss and former Lend Lease executive Malcolm Latham.
These three have clearly got to go given the disaster that has unfolded.
Joseph had a pretty clear conflict of interest in driving the internalisation proposal because his pay went from a miserable $90,000 to a whacking $300,000.
CEO Nic Lyons drove the broader ill-fated offshore expansion and he needs to be booted out as well, although The AFR’s Rear Window column today pointed out that he is about $3.5 million underwater on his debt-funded incentive scheme. Maybe the Lyons severance package will end up including some loan forgiveness.
This is a situation where the major institutional shareholders such as AMP, CommBank, Barclays, ING and Vanguard have to take control. If Lend Lease can’t be persuaded to launch another takeover bid then the personnel changes at the top need to start now, and it is these institutions which should be calling the shots.
Check out this hard-hitting Mayne Report video on the GPT fiasco.