BRISCONNECTIONS has rejected pleas for it and its underwriters to provide a reprieve to retail investors who have unknowingly exposed themselves to millions of dollars in liabilities after snapping up securities in the listed toll road.
After the plunge in the first instalment in the company from $1 to 0.1 cent since its July listing, retail investors have been able to buy large slabs of the company for small amounts of change. The only problem is that for every security purchased for 0.1 cent, security holders still have to fund the next two $1 instalments in the company.
Apart from the appearance of two retail shareholders with a collective 20 per cent stake worth about $80,000 with a further $160 million of obligations, BrisConnections has found itself with several highly distressed security holders on its register.
"This is of a magnitude that I can't possibly deal with," one security holder who asked not to be named told the Herald. "I feel lost. I don't know what I should do at the moment," she said, after discovering only after she made her $1000 investment in the company that she had also purchased a $2 million liability.
The investor conceded the investment was a "stupid mistake" and said she was given no warnings of her obligations when she made the purchase online. It appears she is not alone. "We've been contacted by a number of BrisConnections security holders who are beside themselves because of the amount of debt they have taken on board," said Stuart Wilson, the chief executive of the Australian Shareholders Association.
Mr Wilson said urgent action needed to be taken to ensure online brokers such as Commonwealth Securities and E"additional safeguards" that let would-be BrisConnections investors know of their obligations.
Given the growing base of retail shareholders in BrisConnections, there is speculation the underwriters - Macquarie Group and Deutsche Bank - of its next two instalments, worth $817 million, might have no choice but to buy out the toll road with the remaining institutional shareholders.
The instalments are due next April and in early 2010. But at the weekend, BrisConnections continued to hang tough. "We're not going to start being an apologist for people who don't do their research on this," said a BrisConnections spokesman.
The spokesman said investors who purchased BrisConnections stock without seeking advice were "playing Russian roulette". "It has been the unspoken law of investing since day one," he said.
But wait, there's more.
Like THIS
The Australian Prudential Authority Chairman, Dr John Laker, today confirmed that discussions are underway with institutions about obtaining banking licences.
[...] It's a fair bet that the having a license could have a quite an impact on a financial engineer's share price. Just applying for the said license could help out on a quiet day when shorts are being held at bay.
But my guess is that Babcock and Brown isn't one of the suspects.
And speaking of train wrecks, I hear that a key driver for the Australian banks wanting to keep BNB alive is a disinclination to be hit with adding up their total exposure to all 3,000 Babcock subsidiaries and satellites.
Putting you hand up for lending Phil Green and the boys $150 or $200 million is one thing...but total exposure in ten figures? Not so nice, even when some of them are secured with reasonable assets.
Maybe a guide to which bank has the greatest exposure will be garnered by those most willing to kick in another $20 million or so each to keep the life support machine ticking over.
If you are at the big end of town and get your tail caught in a crack, you cvan always get someone to bail you out, but if you are a retail investor who thinks they can latch on to something too good to be true, you can get screwed.
And THIS is just laughable.The spokesman said investors who purchased BrisConnections stock without seeking advice were "playing Russian roulette". "It has been the unspoken law of investing since day one," he said. That would not appear to apply to those with a disinclination to be hit with adding up their total exposure to all 3,000 Babcock subsidiaries and satellites. Why not? They should have done their due diligence just like the retail investors should have. Hah!
The unspoken law of investing is this, the only way to win is not to play. Because the other unspoken law is that the big boys don't ever lose, not ever. And when it looks like they are going to, they will be bailed out on the backs of those least able to pay, or refuse to pay. And sometimes you do it by becoming a bank so that the whole of society guarantees your business, regardless of how greedy, stupid and criminal you have been.
Which is how we got into this mess.
hmm! partly-paid shares offered with no CLEAR notice that they were not the now-usual fully-paid shares? (partly-paid shares have been a rarity for nearly a century.) clear breach of the contract law requirement of Notice.
tough luck on brisconnections if they were unaware their chosen distributors-of-stock were not complying with the law. the fiduciary responsibility for their agents' actions is theirs; hence the responsibility for fiscal restitution is theirs: they have to back out the purchases at no cost to the purchasers.
Posted by: Saltation | December 10, 2008 at 09:26 AM
NICE!
Brings a whole new meaning to "The spokesman said investors who purchased BrisConnections stock without seeking advice were "playing Russian roulette". "It has been the unspoken law of investing since day one," he said
Lets hope the company that chose intermediaries without ensuring their compliance finds the regulatory and legal teeth buried in their butt.
Posted by: Earl Mardle | December 11, 2008 at 10:38 AM