article in the age

Interesting article from todays age...personally i think grooves is in denial.


http://business.theage.com.au/groves-tries-to-assure-investors/20080301-1w4l.html

Groves tries to assure investors

Deborah Gough, Donna Walker-Mitchell and John Mangan
March 2, 2008

LAST year flamboyant child-care entrepreneur and owner of the Brisbane Bullets NBL franchise Eddy Groves took his champion basketballers on an all-expenses-paid, end-of-season trip to Las Vegas. Now speculation mounts in basketball circles that he has put the Bullets on the market.

But after a horrific week for the well-connected, Ferrari-loving 41-year-old businessman estimated last year by BRW to be worth just shy of $300 million, the Bullets are the least of his worries.

In a few hours of trading carnage on Tuesday, the value of ABC Learning Centres, the company he founded in 1988, plummeted 70%, putting the chief executive on the brink of financial disaster.

About $760 million was wiped off the market value of the company that has about 190 centres in Victoria and more than 2200 worldwide.

While the Australian Shareholders Association has been inundated with calls from upset shareholders, at Los Angeles International Airport yesterday Mr Groves said the company's fundamentals were "very strong". He blamed his share sale on margin calls and denied there was anything suspect about it. "Absolutely not," he said.

Asked to explain the sale, Mr Groves replied: "You know the answer to that. All the short selling in the marketplace forces those margin calls. It's disappointing."

The child-care centre company is accused of not disclosing its substantial debt levels, and also its directors' use of margin loans to buy stock in the company, which forced them to dump their personal ABC Learning stock amid last week's frantic sell-off.

Mr Groves' business empire is in turmoil as the Singapore Government's investment arm, Temasek Holdings, announced it has increased its shareholding in ABC Learning. Trade in the child-care operator's shares remains suspended until Wednesday as the company considers a part buy-out offer from an undisclosed party.

Rubbing salt in the wounds of shareholders was news Mr Groves had dumped more than 8 million of the company's shares, worth $14.8 million. His wife, Le Neve, also a director in the company, dropped 11 million shares on the market and another director, David Ryan, sold his entire stake, 249,101 shares, for $472,046.

While ABC Learning has assured parents its centres will stay open, child-care experts are concerned that the services should be held to ransom by the machinations of the stockmarket.

Charles Sturt University academic Frances Press and the Victorian Children's Council chairwoman, Lynne Wannan, both warned that centres were potentially at risk of closure if the company fell into the wrong hands.

"It has been a myth that child care is a business that you make buckets of money out of," Ms Wannan said. "It is not a business from which you can repay billions of dollars in debt."