Coroner & Legal
Gunns and our government … Maybe the time is now
I see this afternoon (Wed 21 Sept 11) that there has been a change in the substantial holding of Merrill Lynch in Gunns Ltd shares. I think it was called a securities lending agreement. This sort of agreement, Wikipedia says, is often associated with short selling.
Wikipedia went on to say that short sellers borrow stock (such as in the above Merrill Lynch transaction?) and sell it to someone else, while hoping that the share price will later drop so that when they are required to return the borrowed shares, they can return an equivalent number which they will have just ‘re-purchased’ at a lower price (thus they make their profit!) and return these shares in return for what was borrowed.
Are Merrill Lynch short selling? Does this mean that Merrill Lynch / The Bank of America and its related bodies corporate are anticipating that Gunns share price will be dropping further? (as I write it sits on 18c, down 2.5c on the day.)
This Merrill Lynch transaction occurred last Friday, 16th of September. It came on the same day as Gunns issued a market update and two days after the earlier “Clayton’s” update. What were we told? On the 14th we were told that Gunns had reached an agreement with the Govt in respect of the Tasmanian Forest Agreement. They promised an update the next day – the 15th. That didn’t happen, but a day late (16th) they issued another update which said they’d issue another update before a resumption of trading on the 19th. (the 16th and 17th being the weekend)
On the 19th, Gunns did then post a third ‘update’ which contained generalised company strategy, but few details. One conclusion according to Gunns update was that the $23m to be received from the residual rights payout was crucial to Gunns being able to continue with the Pulp Mill Proposal.
[$23m of bullshit … FT {the govt enterprise} in spite of what the Premier has said, is able to walk from the Wood Supply Agreement without having to pay a cent – read the amended Wood Supply Agreement!]
What was the Gunns strategy as outlined in the update? Well, we know that it has already involved the sale of non-core companies to ‘retire debt’ etc. Only trouble is, the debt is still there. What are the other buzz-words?
… consolidation of businesses and associated assets … negotiations with potential equity partners … and the bundling of Gunns’ remaining assets into the Pulp Mill vehicle – Southern Star.
But the bottom line … Without the benefit of the round-table-IGA $23m, Gunns has said it could not proceed with the Pulp Mill. And our Premier has said she’s sure she can find that amount somewhere from within the financial body of the agreement.
My comments began with the suggestion of short trading based on the expectation that Gunns’ share price was about to fall. But I’ve also seen before how (Swiss) UBS, which sells&buys&sells Gunns shares, warned in May last year that at 26c Gunns were high risk. We are now at 18c.
I’m as ignorant in matters economic as a punter out on a Cup-Day spree. I simply wouldn’t know. To me, it seemed that each time UBS bought up on Gunns shares, it was on a mission similar to Merrill Lynch’s short-selling push. Gunns were receiving financial benefit for giving away short-term control of their shares. The other things that I noticed with some of the major UBS shareholding moves, were the subsequent sale of Gunns’ ‘non-core’ assets. I reasoned that Gunns were getting ‘quick cash’ for loaning out shares while they put their various FEAs, wineries etc on the market – when the boat comes in (?). Selling off the farm more likely!
The flaw in this is that I don’t even know who it is who held the shares that UBS or Merrill Lynch took control of. I’ve assumed it was Gunns. Maybe that’s not the case. If Gunns was the holder, then it seemed to me that they would be getting short-term liquidity by loaning for a price their shares. But maybe I’m only dreaming. There are a number of people out there in TT-land who could make an informed response to these matters. Who is benefitting from these buys-sales-buys of Gunns shares?
The Treasurer could analyse and tell us how and why these Merrill Lynch and UBS transactions have been made. In language that we all can understand. If not, maybe a Tas Times correspondent will have to do it for her. Something like the court case that the Friends of the Tamar Valley have had to initiate, in order to get a definition of substantial commencement – something which our Premier said she was waiting for us out there in Public land to step forward and do. We have the government that we have when we don’t have a government.
I have no confidence in it.
AFTERTHOUGHTs:
How much life is left in this government?
Most important: Kim Booth has said that he would move a motion of no-confidence in the government rather than allow them to give any legislative or financial asistance to the Pulp Mill Project.
I would like to ask him to consider if the Government’s refusal to become involved in the matter of the expiry of the pulp mill permit and the water management permits is in effect a devious method of circumventing-in-safety his no-confidence challenge.
Maybe the time is now.