How this maverick investor pulled off a $20 million virtual corporate heist

Embattled funds management giant Magellan Financial Group has fallen victim to what could be loosely described as “legal extortion” – known as greenmail (a legitimate practice) – perpetrated by renowned renegade activist shareholder Nick Bolton.

It will take its place in history as one of the great legal corporate heists – both in size and audacity.

This isn’t Bolton’s first rodeo, but it will count as his most lucrative yet for his investment company Keybridge.

Maverick investor Nick Bolton.

Bolton now stands to receive about $18 million after Magellan was backed into a corner by Bolton who used as leverage 190 million options he bought in one of Magellan’s largest funds to apply pressure to wind up that fund.

On the one hand, Magellan risked incurring a $160 million liability; on the other it could buy the options that Bolton had amassed in one of Magellan’s largest and most important funds. There was no winning outcome for Magellan.

Magellan described its move as a risk management exercise. Others would describe it as being outmanoeuvred by the young maverick.

To be fair to Magellan, it was vulnerable to attack from the likes of Bolton because of decisions when the particular fund Bolton had targeted was set up in 2021 – when the former rockstar of funds management Hamish Douglass was still running the company.

Bolton came to fame as a rebel shareholder activist aged 26 when – in what can only be described as a David and Goliath spectacle – he held Macquarie Bank to ransom as it tried to float Brisconnections.

He stood in the way of a $4.5 billion deal, having spent only $47,000 dollars for his stake.

It was the stuff of legends, and at 26, Bolton was rewarded with an outsized profile and a spot in the annals of Australian corporate history.

In the 14 years since, he has engaged in a series of deals with a chequered success rate.

In 2015, he was barred by the corporate regulator from managing companies for three years. The move followed the Australian Securities and Investments Commission’s investigation into Australian Style Investments Pty Ltd which found that Bolton breached his duties as a director and that he failed to hold adequate records to explain the financial position of the company.

And only 10 days ago, The Australian Financial Review reported that Bolton was fighting a bankruptcy notice issued by boutique law firm Atanaskovic Hartnell.

Bolton, who is disputing the notice, described it as “mischievous and defective”, and alleges it’s part of “a long-running dispute” in which he asserts he previously overpaid the firm.

Meanwhile, he is knee-deep in another corporate stoush, in which his Keybridge is attempting to thwart a tie-up between the owners of two of Australia’s largest radio networks, ARN and Southern Cross Austereo.

Magellan described its move as a risk management exercise. Others would describe it as being outmanoeuvred by the young maverick.

His claims that ARN has breached the Corporations Act appear to have received a positive reception from the Takeovers Panel – a statutory body set up to resolve takeover disputes.

Bolton’s ally in this scrimmage is well known media figure and a fellow Keybridge director and shareholder, Antony Catalano.

But Bolton also has no shortage of detractors.

His arch nemesis is another of the high-profile members of the investment community, Geoff Wilson, who is also a large shareholder in Keybridge but has been embroiled in a series of disputes with Bolton.

Most recently, Wilson described Keybridge’s losses as unsustainable after it reported a loss of almost $9 million for the year to June 30 after taking a hit on cryptocurrency trading, legal fees and other investments.

And it was only a few weeks ago that Magellan appeared to have taken the upper hand in its battle with Bolton when he lost an attempt to force a unit holder vote on winding up the fund.

But Magellan was concerned that Bolton would team up with a sophisticated New York hedge fund that would fund the prosecution of his strategy to force Magellan’s hand.

It was the best of two poor options for Magellan which has been plagued for more than two years, with a loss of funds under management, executive upheaval and pressure on profits.

It has been struggling to revive its fortunes as funds under management over this period have fallen from $117 billion to $35.2 billion.

But for Magellan, the hits just keep coming.

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