The corporate regulator has refused to release secret conversations with the Australian Securities Exchange over IOOF’s controversial $1 billion capital raising, as the wealth giant’s irate shareholders lodge formal complaints.
The Australian Securities and Investments Commission has released just four of 21 documents identified following a freedom of information request about the much-maligned IOOF capital raising in September last year.
IOOF CEO Renato Mota has acknowledged shareholder angst. Eamon Gallagher
It issued close to 300 million new shares, representing about 85 per cent of previously issued capital. Institutional investors chipped in $734 million while an adjacent share purchase plan for regular, retail investors raised just $3 million.
Documents obtained byThe Australian Financial Reviewunder freedom of information show the corporate regulator received at least three formal complaints about IOOF’s use of the waiver and the terms of the capital raising, which resulted in many retail shareholdings being diluted.
‘The dilution is massive’
“Using the COVID‐19 waiver allowed the deal to be carried out with existing shareholder approval,” wrote one complainant. “Good on you and those greedy merchant bankers from Citigroup.
“The fact that the corporate regulators (ASIC/ASX) even allowed such a transaction to occur, is also breathtaking.”
Investment bankers at Citi advised IOOF on the transaction and market sources have suggested it was influential in the decision to make use of the temporary ASX waiver.
The complainant claimed he was unable to participate in the retail component of the entitlement offer because he had been laid off during the pandemic, meaning the value of his IOOF holdings were diminished by the company’s issue of new shares.
The complaint was also forwarded to IOOF chief executive Renato Mota, who haspreviously acknowledged shareholder angstover the company’s languishing share price, but defended the MLC Wealth transaction as being in their long-term interests.
“The raising is being undertaken to fund the MLC acquisition, it has no connection to COVID,” wrote another complainant. “The dilution is massive.”
A third criticised IOOF for placing a “large portion” of the institutional placement with investment managers not already on the company’s register. IOOF declined to comment.
In correspondence seen by theFinancial Review, ASIC officials thanked the complainants for the information and assured them the regulator was “looking into” the matter.
‘Powerful disincentive’
However, while it released the shareholder complaints, ASIC opted to exempt another 17 documents, most of which contained correspondence between ASIC and the ASX over the IOOF capital raising.
“ASX has objected to disclosure and submitted that its correspondence with ASIC was provided in confidence,” wrote ASIC official Haydar Tuncer in his decision.
“If the documents were disclosed, it would likely act as a powerful disincentive against consulting with ASIC proactively and in a detailed way.
“It is important for both licensed exchanges and ASIC to exchange information on a full, frank and timely basis, particularly in relation to market activity such as IOOF’s announcement to rely on the temporary class waiver.”
When it announced the temporary relaxation in the raising rules in April last year, ASX made clear it would have a focus on equitable allocation in capital raisings during the pandemic.
“Where a capital raising appears to ASX to have been structured equitably from the stance of existing security holders, ASX is unlikely to withdraw the benefit of the class waiver even where the capital raising is not specifically COVID-19 related or urgently needed, recognising that this is a challenging time for all listed entities to raise capital,” the market operator said at that time.
“However, where a capital raising appears to ASX to have inequitable features from the stance of existing security holders, ASX is likely to withhold the benefit of the class waivers for that capital raising.“
The fact that the ASX allowed IOOF’s use of the waiver showed it had a “pro-issuer” bias and did not care about the plight of individual shareholders, one of the complainants told theFinancial Review.
“The ASX says it wants to encourage more retail participation but then it focuses all its efforts on keeping sweet with the insiders,” the complainant said. “The exchange is run for the benefit of investment banks.”
Retail entitlement offer
An ASX spokesman said the market operator should instead be seen as “pro Australian market”.
“We seek to balance the interests of multiple parties to achieve the best outcome for the market overall,” the spokesman said.
“The capital raising framework in Australia is deliberately and successfully flexible, and puts the onus on company boards and management to make choices that best suit the needs of their stakeholders. It’s up to boards to make sure they do the right thing by their investors to whom they are answerable.”The spokesman said it should be noted that IOOF did include a share purchase plan and retail entitlement offer as part of its equity raising structure.
A number of IOOF shareholders voiced anger over dilution and use of the waiver at its annual general meeting in November, but the wealth managerfended off a protest voteagainst the re-election of two board directors.
The dispute comes asnew data indicates $38 billion was raisedby publicly listed companies in 2020, of which just $5 billion was allocated to retail shareholders. Investment bankers earned at least $200 million in fees.
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