Terry McCrann: ASX doubles up on investor rip-off
The ASX and ASIC have together signed off on the retail rip-off rort which allows institutional investors to rip off mum and dad and self-managed super fund retail investors, writes Terry McCrann.
Terry McCrann
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I have three questions for the ASX – that’s the fake regulatory ASX which is supposed to provide a fair and functioning share market for all investors.
Aren’t the billions of dollars you have already allowed – indeed, actively encouraged – institutional investors like industry and retail super funds to rip off mum and dad and self-managed super fund retail investors, in just a few months so far this year, enough?
Aren’t the tens of millions of dollars you have allowed investment banks to pocket for handing out that free money to those industry insiders in this mother-of-all and always repeated rorts, so far this year, also enough?
The money is not of course free: it comes straight out of the pockets of those retail investors.
Obviously not, as the ASX in its breathtaking idiocy has decided to give them another four months to rip off more billions – the institutions; and more millions – the investment banks.
I’m sorry; I’ve given the ASX all the credit. I do apologise to its associated fake corporate regulator ASIC.
It’s the ASX and ASIC together which have signed off on the retail rip-off rort. The ASX is the mechanism for doing it; ASIC either looks the other way or dozes through it all.
This brings me to my third question: has the ASX even looked at what’s happened to the local, global and in particular the Wall Street market; and so what’s happened to share issues and the profits they delivered?
I wouldn’t want to push my luck to ask if it had the slightest institutional understanding of what’s happened and what has driven the dramatic recovery in share markets all around the world.
That would take me into ‘trying to explain nuclear physics to a passel of hogs’ territory; and that’s always dangerous: the hogs are never going to understand and they end up getting tetchy.
The rise and rise in the market has not only super-sized profits that have been transferred from retail and SMSF investors to the instos; but made an absolute joke of the suggestion that either the instos or the ‘underwriting’ investment banks had assumed any risk in subscribing for selective placements and pro-rata issues at deep discounts to market.
It’s not as if we haven’t been here before. We are ‘here’ every year, with selected discounted placements and non–renounceable issues; but we really saw the supersizing of the rort through and after the GFC.
What’s different this time is the decision by ASX and ASIC to super-supersize it, by allowing a company to make a placement to those selected instos of as much as 25 per cent of its existing capital – up from (the already too-high) 15 per cent.
And then second, allow an issuer to ‘count’ as its existing capital any shares issued in an accompanying pro-rata issue.
They can be either renounceable or non–renounceable; these days they are always non-renounceable. Why? It’s ‘easier’ for everyone, defining ‘everyone’ as the insiders inside the cosy club; to which mums and dads and SMSFs are definitely not invited.
So if a company has a one-for-one issue at the same time, the placement of shares at a big discount to market can be 50 per cent of the pre-existing capital. The dilution of the equity of retail is bad enough; much worse is the direct transfer of real money from them to the instos.
While the investment banks just pocket the millions for risklessly handing over free money (contributed by retail) to those instos.
Again, has the ASX (or ASIC) actually looked at how huge those profits have been? Goodness me, they might have had an excuse – even a half-arsed reason – in the fear and loathing about the virus and plunging markets back in March.
But in July? You’ve got to be kidding.
The ASX just pumped out garbage: “The decision was made in light of the high and increasing levels of COVID-19 infections in major overseas markets, recent events in Victoria, and the present uncertainty about the nature and level of government economic stimulus in Australia after September 2020”.
Even if all that were valid – it most certainly is not; there was far more fear and loathing three months ago – it’s utterly beside the point.
As I have generously tried to point out to the ASX – oh, not just through and after the GFC, but on and off for maybe 30 or 35 years – there are perfectly functional mechanisms for giving companies an ability to raise fresh equity without being unfair, without ripping off, retail.
But they would make life somewhat more ‘difficult’ for the insiders – investment banks, instos, company boards.
By ‘difficult’, I mean it would require them to actually do something to earn their money.
PANEL HOLDS VIRGIN HOSTAGE
Talking of dozy regulators, it has now been four full days since the Takeovers Panel received the ‘try on’ from the Virgin bondholders, demanding it interfere in the administration of the failed airline.
How long is it going to take for it to work out that it has no role in this matter and that any intervention would be reckless and an exercise in regulatory negligence? As the Panel’s own website states: it’s there to resolve disputes “about a takeover bid until the bid period has ended”.
Would it like to share with the world what ‘takeover bid’ has been made for Virgin and when the ‘bid period’ ends?
When it wakes up of course.
Originally published as Terry McCrann: ASX doubles up on investor rip-off