The corporate watchdog has been called on to investigate recent trading of Aveo’s shares ahead of the company announcing a $145 million buy back this week.
Investment specialists have called on the corporate watchdog to investigate recent trading of Aveo’s shares by its largest shareholder Mulpha and a director ahead of the company’s announcement ofa $145 million buyback this week.
The buyback of 9.3 per cent of the company’s shares was launched on Tuesday after emergency weekend board discussions triggered by the publication of the first articles in a joint Fairfax Media-Four Cornersinvestigation into the sector and Aveo in particular.
The company’s chief executive Geoff Grady told the media this week that the board canvassed a buyback in those discussionsinanticipation of a share price fall on Monday morning in the wake of the weekend articles and impending Monday night coverage on the ABC and Fairfax Media.
Ownership Matters chief executive Dean Paatsch told Fairfax Media most security holders would have liked to have bought shares on Monday knowing a buyback was under consideration.
Aveo chairman Lee Seng Huang was involved in trades. Photo: Jessica Hromas
He was referring to Aveo’s 11.5 per cent share price plunge on Monday after the investigation exposed exorbitant fees, complex contracts and questionable practices that put profits over the health and safety of residents.
The investigation has led to calls from Labor, the Greens and former Australian Competition and Consumer Commission chairman Allan Fels to urgently review the retirement village sector.
“Trading before the buyback was announced is certainly worthy of a raised eyebrow from ASIC and further investigation,” Mr Paatsch said.
ASIC reviewA spokesman for the Australian Securities and Investments Commission (ASIC) said the watchdog would review the trades.
Ownership Matters chief executive Dean Paatsch. Photo: Rob Banks
“ASIC will always examine trading, particularly directors’ trading, before, during a significant or material event or announcement,” the spokesman said.
The review will look at the on-market purchases of shares by Mulpha International – a company associated with Aveo chairman Seng Huang Lee – and purchases by non-executive director Jim Frayne.
RELATED COVERAGE:AveoPart 1: The price of freedomAveoPart 2: A get poor quick schemeAveo Part 3: Bleed them dryUnder Australian companies law directors are not allowed to trade while in receipt of inside information.Fairfax Media is not suggesting any of the directors have broken the law.
Buybacks are commonly used to reward shareholders and put a base under a company’s share price if it is falling.
Dean PaatschBuyback ‘discussed’Aveo chief executive Geoff Grady told News Corp the Aveo board held a meeting on Saturday to consider the buyback in anticipation of fallout from the first instalment of the series in Fairfax newspapers on Saturday.
Mr Grady said in that interview that the final decision to conduct a buyback was made on June 26, the same eveningFour CornersairedBleed Them Dry Until They Die.
Aveoshares closed on the Friday before the first investigation story at $3.05.
According to the directors’ interests notices released on Tuesday, a company linked to Aveo chairman Seng Huang Lee, Mulpha International, purchased 414,689 shares for $2.70on market on June 26.
A separate notice showed Mr Frayne purchased 10,000 shares on June 26 for $2.79 a share.
Aveo again declined Fairfax’s request for an interview on Tuesday.
Responding to inquiries, Aveo said that “all relevant parties are satisfied that they have complied with their legal obligations”.
Fairfax Media was unable to make contact with Mr Lee through Sun Hung Kai & Co in Hong Kong where he is chairman.
Mr Frayne told Fairfax Media: “The board was briefed on, and considered, management’s proposal for a buy-back after close of market on Monday 26 June. My share acquisitions occurred before then. This acquisition was in accordance with the ASX rules and Corporations Act.”
Asked why his account differed from Mr Grady’s published comments Mr Frayne said: “The quote is incorrect.”