Insider trading committal hearing told info into Wesfarmers’ potential buy was widely discussed

A Melbourne court hearing into insider trading charges has been told publicly available information in a lithium company could have led investors to buy shares.

A Melbourne man accused of insider trading has used one of his first days in court to show there was plenty of publicly available information indicating stocks in lithium major Kidman Resources could be worth buying without knowing about plans of an imminent Wesfarmers takeover. 

Duncan Stewart allegedly made $68,000 after he bought shares in Kidman in April 2019 with inside information about a proposal from Wesfarmers to acquire the company before plans were announced to the market, the Australian Securities and Investments Commission has claimed.

Mr Stewart’s barrister, Ruth Shann, SC, questioned ASIC’s expert witness, stock analyst Martin Duncan, on Tuesday in the Melbourne Magistrates’ Court during a committal hearing about what information investors could have had access to that may have influenced them to buy securities in the stock.

Duncan Stewart outside court with his barrister, Ruth Shann. Picture: Angelica Snowden

Ms Shann raised a number of publicly available stories about the companies, including those published in The Australian which speculated about Wesfarmers’ interest in lithium projects in Australia and overseas, and articles in the Australian Financial Review which suggested Wesfarmers boss Rob Scott in 2019 had a $10bn acquisitions war chest and a “mandate” to invest.

She also highlighted a number of posts on stock market trading forum HotCopper – which has about 250,000 subscribers – which discussed the possibility of Wesfarmers taking over lithium companies, including Kidman.

As well, the court heard Mr Duncan received a broker report from JPMorgan from February 2019 that opined Kidman shares were undervalued and likely to rise.

ASIC supplied Mr Duncan with a bundle of documents containing articles, HotCopper posts and analyst reports to produce an opinion about whether or not particular information could influence hypothetical investors. Mr Duncan also told the court he conducted his own research into Kidman and lithium stocks.

“(Do you) accept by this point (on 18 march 2019) there were multiple posts on HotCopper suggesting Kidman was a good potential acquisition for Wesfarmers,” Ms Shann asked Mr Duncan. He agreed.

Mr Duncan also agreed in one of the HotCopper posts there was a “speculative” list of potential for Kidman Resources, which included Wesfarmers.

He agreed that a combination of analyst reports, media stories and speculation online could have “influenced” someone to think it was possible Wesfarmers was interested in Kidman.

In his re-examination, Mr Duncan said information on HotCopper was not of “very high value” and information about potential takeovers should be understood in the context of other companies being mentioned in posts as well.

The corporate cop has charged Mr Stewart with multiple counts of insider trading. ASIC alleged Mr Stewart engaged in insider trading two times in April 2019, when he bought shares in Kidman Resources while in possession of inside information about a proposal by Wesfarmers to acquire Kidman Resources before announcements to the market.

According to his charge sheet, Mr Stewart is also accused of encouraging a family member to buy Kidman Resources shares when he knew it was considering an earlier takeover offer from one of the world’s biggest lithium producers, Chilean company SQM.

The charge sheet claimed SQM “had already offered to acquire Kidman Resources Limited for $2.40 per share”, that the acquisition could happen in the week starting March 4, 2019 and that the share price could move to $2.40 “or beyond”.

The takeover offer, which has not previously been reported, ultimately did not proceed and Wesfarmers acquired Kidman Resources in September 2019 for $1.90 per share in a deal worth $776m.

The case continues.