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The ASX itself: CHESS replacement leads to lawsuit
One of the more sensational ASIC cases of this year went to none other than the ASX-listed operator of the bourse: The Australian Securities Exchange (ASX:ASX).
The company has long been trying to overhaul its in-house clearing system (Read: Share trading software) that more or less underpins the entire Australian market. Back in the COVID years, they tried using blockchain to replace it.
If that sounds overambitious to you, you’re spot on. ASIC now alleges the ASX lied to shareholders – and the regulator – when it said the replacement project was tracking along nicely at multiple points.
Except, it wasn’t – don’t take it from me, take it from ASIC, who are now suing the ASX. (The bourse operator most recently said the CHESS overhaul will be completed in 2026.)
In June, the share price cratered when the company told investors the costs of its technological operations were going to be far higher than thought. But the stock bounced back, and one-year returns are up +7% as of December 18.
Wisetech: Romances of an unwise nature
This one probably needs no introduction: Australian tech behemoth and superfund darling Wisetech (ASX:WTC) took a tumble towards the end of the year when the proclivities of billionaire founder Richard White hit the mainstream press.
Wisetech’s White was rumoured in the press to have offered business advice in exchange for sexual acts with at least two women, and that went down about as well as you’d expect.
I wrote at the time that the scandal was ultimately unlikely to permanently dent the Wisetech price, and in a way, I was both wrong and right.
While the company has won back more than half the losses triggered when that news hit the public, shares are still down compared to where they were right before the scandal dropped. That said, 1Y returns are up +63%.
So, for investors, the scandal probably doesn’t matter that much.
MinRes: Chris Ellison’s tax history catches up
In a somewhat similar vein, this Wooden Spoon also goes to a billionaire founder whose worldview fell foul of the company’s shareholders.
Except this time it was regarding allegations Mineral Resources (ASX:MIN) chief Chris Ellison ripped off shareholders, and taxpayers via the ATO.
There was a lot that came out of this one, but the ultimate allegation is Ellison used a series of historical shell companies set up in tax havens to do some creative accounting that ended up benefitting him and his closest executives.
There were also further claims Ellison was giving kickbacks to himself through companies owned by members of his family.
Ellison was effectively slapped with a $20M fine and announced he’d depart, but that was up to 18 months away at the time. Responding to public pressure, the chairman then decided to announce he’d accelerate his own exit at the AGM, even though it was really Ellison everybody was (more) mad at.
Already smashed by low iron ore and lithium prices, MinRes ended the year with 1Y returns down -49%.
Fortescue: Hydrogen hopes humbled by reality
This one requires a bit of a backgrounder, but it’s one of the bigger Wooden Spoon-worthy moments of the year.
Fortescue Metals Group (ASX:FMG) top dog Andrew Forrest, seemingly overnight a few years ago, became less of an iron ore kingpin and more of a green hydrogen advocate. He set up Fortescue Future Industries (FFI) and spun it out of FMG to a mixed reaction from the world at large.
He then spent years touring the world setting up non-binding hydrogen collaboration MOUs everywhere from Europe to Oman.
For a while there it looked like he was a true believer, even as the market grew tired of hydrogen around the same time oil and gas came back in vogue triggered ultimately by the Ukrainian-war-borne Russian gas supply cutoffs to some Western European nations.
The whole world also realised by late 2023 that a global conversion to hydrogen as a fuel was so far off and technologically expensive it was more of a two-decade prospect.
In that context, Andrew Forrest this year cut 700 jobs widely believed to mostly relate to FFI and tucked it back into FMG, where it has since remained. Talk about a false start.
Woolworths: Brad bungles an ABC interview
The pivotal media bungle that really got the cost of living crisis associated with supermarket chains in the Australian zeitgeist, it was early this year former Woolworths CEO absolutely bungled an interview with ABC’s Four Corners.
The interview was so poorly received he would only remain as the company chief for a number of days thereafter. Don’t take my word for it: You can watch below. (For the time-poor: Brad walked out of the interview.)
A word of advice for future CEOs, probably don’t lazily attack former commissioners when you’re dealing with the same ABC journo who received death threats for reporting on Australian military war crimes.
Woolworth’s 1Y returns are down -15%.
Harvey Norman: When customer deals aren’t deals
If you want to find a shareholder base that really isn’t easy to rattle, look no further than Harvey Norman (ASX:HVN).
Harvey Norman got in trouble with Echo Law back in September when a class action was launched against the retailer for offering junk warranties on products.
In short, under Australian Consumer Law (ACL), there’s already a certain warranty period customers are entitled to for purchasing any good under the law without needing to pay anything. Harvey Norman charged customers for warranties instead.
Literally two days later, Harvey Norman would be hit by a second-class action. The shares ended up in the green even as that was announced.
And so when in early November ASIC then took Harvey Norman to court (that’s the third lawsuit on the retailer’s plate for those counting) it’s perhaps not surprising the market wasn’t really too shocked by that either.
Harvey Norman 1Y returns are currently up +19%. The inevitable demand for TVs, fridges, and furniture is hard to dismiss.
Star Entertainment & Skycity: Just about everything
I’m bundling these companies together even though they’re separate because they’re basically the same creature.
Star Entertainment (ASX:SGR) probably deserves the most attention given it was stung when it failed to release its FY24 report on time and had its shares suspended. Things looked rosier back in May when it appeared the company may have been bought out.
Star has also copped multiple regulatory fines this year as it remains in a hot pot of water boiled up by the NSW state regulator (which has been probing the company for years, particularly around money laundering law considerations – like every other casino in Australia.)
Sky City Entertainment (ASX:SKC) has had a similar year.
Fined $67M in June on money laundering law breaches (a lawsuit which involved claims patrons at the casino were involved in human trafficking,) Skycity would then receive another $13M fine months later, as well as incurring a penalty in NZ.
This isn’t exactly news, but casino shares aren’t favourable on the ASX this year. Luckily, the companies that make pokie machines remain largely untouched.
Skycity’s 1Y returns reflect a decline of -20%; those for Star down -61%.
Rex Airlines: Flight of fancy grounded
Regional Express Holdings (ASX:REX) – currently suspended – has been struggling to compete with Qantas and Virgin this year on its own right, and as a business, there’s been much hubbub about the availability of regional airline services in light of its woes.
But that unfortunate business reality does not a Wooden Spoon award make.
Coming in right at the end of the year, according to reports in the mainstream media, there’s now reason to believe Rex took a leaf out of the ASX’s book and misled the market on profitability (per the ABC).
Here’s another company now being taken off to court by ASIC which alleges the company knew it wasn’t going to end up in the black for FY23 but didn’t realise guidance to that effect.
Rex’s 1Y returns are down -29%.
Another Wooden Spoon from the last month of the year, retailer Kogan (ASX:KGN) has also fallen foul of ASIC.
This time, the alleged issue isn’t around warranties or financial projections – it’s good old insider trading allegations.
Kogan founder Ruslan Kogan and CFO David Shafer are thought to have made a combined $17M when they played around with options issued to them in 2020 not long before the company’s share price tanked on a less-than-well-received earnings update.
In between the lines, the issue is those two men likely knew the market wasn’t going to like what that update spelled out, and so got in early.
The case remains ongoing.
Kogan’s 1Y returns, however, are up nearly +16%. Like Harvey Norman, investors have more faith in the long-run ability of consumer demand to recover what losses any scandal might cause.
Lifestyle Communities: Charging rent to ghosts
This one’s a real doozy, though it’s not like it’s the first company to have done this.
In short, gated community company Lifestyle Communities (ASX:LIC) attracted ire earlier this year when it was alleged the company has been charging dead tenants rent, effectively to the detriment of their families (and human morality, but perhaps not business acumen).
The company released a lengthy response introduced by the ABC where it explained how it wasn’t really charging dead tenant’s rent but that the families didn’t understand its post-death procedures well enough.
“In the scenario described, fees can be suspended immediately and accrued until the sale of a home, to be deducted from sale proceeds. No interest is charged on deferred fees. Lifestyle Communities has no incentive to delay the sale of a home.”
Some eighty residents took the company to the Victorian court system back in July which was enough to start a downward run on the share price that hasn’t really ended, despite a partial recovery of sorts.
LIC 1Y returns are down -54%.
