The rorting of the market goes on, regardless of regulators, commitments to transparency and all the self-regulatory guff that companies and ASIC usually trot out.
In these and other recent cases, you’d have to exempt the ASX from any questioning about what they were doing, because it’s been their prompt querying of companies whose shares have had suspicious price moves that has prompted immediate disclosure.
Three egregious examples in the past ten days stand out involving major deals that have influenced the share price.
The most recent was yesterday when Hutchison Australia, the local arm of the Hong Kong company controlled by billionaire Li Ka-shing revealed it was merging with the local arm of the UK-controlled Vodafone.
The news came after it was queried last Friday over a 32% surge in the share price in 24 hours.
The ASX wrote in its query:
We have noted a change in the price of the Company’s securities from a close of $0.087 on Thursday, 5 February 2009 to a high of $0.12 today. We have also noted an increase in the volume of trading in the securities over this period.
The shares closed at 11.5 cents on Friday and rose 1 cent yesterday after the merger deal was announced.
The deal effectively sees Hutchison disappear as it will be absorbed into Vodafone, whose name and branding will continue. All Hutchison brands will vanish.
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A week earlier, Qantas was forced to reveal plans to raise up to $600 million and release its interim results early after an ASX query.
The ASX wrote: “We have noted a change in the price of the Company’s securities from a high of $2.49 on 30 January 2009 to a low of $2.29 at the time of writing today.”
That 12%-plus sell-off in the Qantas shares cut the leeway the company had in pricing the issue. Instead of around $2 a share, the price ended up at $1.85 in the first step in the funding, the $500 million issue to big shareholders.
At the end of January, Lend Lease was queried by the ASX about a sharp fall in its share price. This was the query on January 28: “We have noted a change in the price of the Company’s securities from a close of $6.90 on Tuesday, 27 January 2009 to low of $6.30 today. We have also noted an increase in the volume of trading in the securities over this period.”
That was a fall of over 10%.
On January 29, the company said that apart from reports about poor economic conditions and the company’s previous writedowns, it wasn’t aware of any reason why the shares fell.
On February 4, the company called a trading halt and then announced plans to raise $302.5 million. The price was $6.05, down 85 cents, or a fall of 12.3%.
That again has forced the issue price down for Lend Lease. The company didn’t disclose the advisers.
The upshot of these leaks is that people made money, either by selling out quickly and then buying back in at a lower price, or by seeing the respective shares fall and taking up shares in the issue at lower-than-expected prices, thereby improving the chances of a profit (and improved performance for managed funds) over time.
Of course, share prices inevitably fall to the issue price after the trading halt ends, but that’s part and parcel of making a large placement these days.