good business sense?, page-11

buddy, sirjohnnyboy and all the guys,

Terry McCrann is good to his word, the ink's still wet on this article and shows just how the retail shareholders were manipulated and shafted by the big end of town.

MR may get his handout and save his bacon, but IMHO he is morally bankrupt.


ASIC boss Tony D'Aloisio silent on investor rip-off
By Terry McCrann
July 08, 2009 12:00am

ASIC boss Tony D'Aloisio has given only one speech this year, yet he had nothing to say about the biggest rip-off we have seen of small retail investors.

D'Aloisio's speech purported to address "Regulatory issues arising from the financial crisis for ASIC and for market participants."

Pity that didn't include the billions of dollars ripped from small investors and passed to institutional investors and investment banks.

The institutions got - continue to get - the money from being handed shares at big discounts denied to retail shareholders. The investment bankers get the money in fees for handing out those shares - effectively being paid to hand out free money.

And to stress, it's not theoretical value. It is real money that is taken from unsuspecting or helpless and certainly unprotected retail investors in a company and handed to institutions which might not even be shareholders in that company. Plus the investment banking middle-men.

It's not as if D'Aliosio hadn't noticed, although it's possible he didn't understand. In the speech given at the end of May, he lauded the $53 billion in capital raised by Australian companies on the ASX between October and April.

That was precisely the process by which the money grab has taken place. And it's probably grown by another $20 billion or more since.

These raisings have all been done at huge discounts to market and by one means or another have all been heavily weighted away from retail investors to institutions.

If the head of our corporate cop doesn't understand that, it's disturbing enough. If he doesn't believe anything needs to be done about it - even at its most basic, simply utilising his 'bully-pulpit' - that's even worse.

Perhaps he was still thinking with his previous hat as CEO of the ASX. More equity capital means more ASX turnover.

Yet in the speech he had even emphaisised the "loss of confidence" suffered by retail investors. "Restoring confidence for retail investors (to come back to the market) will be a big issue going forward," he added

Well, Mr Chairman, not being ripped off big time by the 'big end of town insiders' - with the corporate cop turning a Nelsonian blind eye to what's going on - would be a good place to start.

There was a bitter, completely unintentional and unknowing kick in his line about the "pain which goes with wealth destruction, particularly for retail investors." yes, well, quite.

ASIC's performance becomes a complete - if thoroughly unpleasant - joke when you focus on its one big high profile market move in combination with ASX to protect buyers of partly-paid securities.

That's effectively one stock - BrisConnect. It's effectively after the horse has well and truly bolted. And it's effectively to protect investors from their own greed and/or stupidity.

Never mind protecting them from, on a much grander scale, the system and the insiders, where they the retail investors are rendered utterly powerless to protect themselves.

Yesterday I showed the huge difference between a renounceable pro-rata rights issue where all investors, big and small, informed and financially illiterate are treated the same.

We have just one such big issue - Rio Tinto. And only because the London styock exchange requires it.

The Asciano case is the most egregious example of the multi-billion dollar downunder. The table shows the impact. Where retail shareholders are being screwed over big time by the combination of a one-for-one non-renounceable issue and massive placements to institutions.

Non-renounceable means that not only if you don't take up your right to a cheap new share you lose it, but that right is handed to an institution.

At the time these issues were announced Asciano was trading at $1.83. Both the issue and the massive placements were at the huge discount of $1.10.

Someone holding 10,000 shares worth $18,300 on that day who doesn't or can't take up their shares will lose $5350 at yesterday's $1.295 share price. They will have had 29 per cent wiped off their investment.

Even a small investor who does take up their cheap shares will still lose $3400 - or 16 per cent of their investment.

But an institution which gets four extra cheap shares, about its pro-rata placement 'entitlement', will emerge with a small profit on its total investment. And an institution which gets a further cheap share from a forfeiting retail investor will be sitting on an even bigger profit.

And of course in reality you can multiply these profits many times for the institutions - I've just standardised the sums around 10,000 shares for easy comparison of the rip-off.

In total, it will cost retail investors tens of millions. It will benefit institutions by the same amount - less the fees to the middle men.

Not bad if you can get it. It's a good thing ASIC is out there 'protecting' retail investors. How much more would they be ripped off otherwise.


All power to Terry.

Hang tough though everyone, maybe we'll take up our rights and see it head north. Certainly heavy accumulation going on.

All the best,