BlueScope Steel seems to have some questions to answer. It recently announced a 4 for 5 issue of shares at 40 cents. As the ex rights shares have traded over the last few days for less than 40 cents the value of these rights is zero at present. As Bryan Frith points out in The Australiian it would also be interesting to know what the share price fell so markedly before this huge capital raising:
“The timing of the issue was a surprise, coming only three business days after BlueScope held its annual meeting. At the meeting the company reiterated its profit outlook for 2012, but there was no mention of the group’s debt position, and in particular the $478m blowout since June. If, as seems probable, BlueScope already knew that it was planning a capital raising, the AGM would appear to have been the appropriate time to make such an announcement. That it was not is no doubt one reason why the announcement took the market by surprise.
However, it may be that not everyone was surprised, because in the week before the announcement BlueScope’s share price slumped from 78c to 61c under much heavier trading than normal, and there was also heavy shorting of the stock. ASIC should take a look to consider whether any insider trading was involved”. (my bold).
Of course there will be an “explanation” – there always is – but the long-suffering shareholders in BlueScope deserve a better deal than this. Many have seen almost the entire value of their investment vanish over recent years while this year, when the firm made $1b in losses, executives slurped at the trough and awarded themselves $3m in bonuses for work well done. Problems in our modern economy can often be traced to public sector waste but the greedy clowns in the private sector whose main skill seems to lie in enriching themselves as the firms they manage collapse around their ears, seem to be a significant source of private sector inefficiencies. Yes the exchange rate has appreciated and yes the Australian market for steel products is weak but don’t shareholders pay huge salaries to executives to deal with such problems.