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Revision as of 23:12, 12 January 2010 by Simpleterms (talk | contribs)(diff) ← Previous revision | Latest revision (diff) | Newer revision → (diff)David Tweed is an Australian businessman who conducts a business of offering to buy shares at either below market value, or at a price that is above market value but via installments. Paying in installments can disadvantage the seller due to the time value of money. Such a business is legal in Australia provided that it complies with relevant Government regulation.
Early and personal life
Born as David Tschernitz, he was the son of an Austrian migrant. He was educated at Penleigh and Essendon Grammar School in the early 1980s. Tweed subsequently earned an accounting degree from the Royal Melbourne Institute of Technology. Tweed's first and only full time job was as an employee of stockbroker McKinley Wilson from which he later resigned to commence his discount share offer business. His original house doubled as his office and was in Roden Street, West Melbourne, however he has since moved into the city.
Tweed lives in a de facto relationship with Donna Newman and they have three children.
Investment strategy
In Australia, there is a high proportion of share ownership by less sophisticated investors. This is a by-product of the demutualisation and other corporate actions in the last 20 years in Australia. Companies such as Insurance Australia Group Limited (IAG) and AMP Limited (AMP) have demutualised and in the process given shares to the former (mutual) policyholders. Tweed set up two companies: National Share Purchasing Corporation Pty Ltd (NSPC) and Direct Share Purchasing Corporation Pty Ltd (DSPC). By obtaining contact details through the public share register of target companies, he has made several offers to purchase shares in those companies. The offers are either below the market prices that could be realised on the Australian Stock Exchange (ASX) or greater than the market price but paid over years by instalments. Tweed's offers would often be in the form of a cover letter with large font detailing his offer. The offer, in accordance with the Corporations Law, clearly displayed the most current market price of the securities together with the price offered to the shareholder. Accompanying the offer document was an enclosed off-market transfer form that was pre-filled with the details of the target shareholder. Payment for all purchases were made to accepting shareholders within 5 business days of receipt of the off-market transfer form. A large number of shareholders have accepted Tweed's offers despite the market price being clearly available in newspapers such as The Sydney Morning Herald and The Australian Financial Review. The market price was also clearly visible on the offer document. However, his offers have also been accepted by professionals such as doctors, lawyers and judges who would be expected to know the price of their shares. While people accepting his offers would make more money by selling on the ASX, that requires the appointment of a stockbroker and Tweed's offers provide an easy way of selling shares. Tweed has a poor relationship with the press arising from his policy of not granting interviews unless he is paid. Tweed has been accused of unethical behaviour and of taking advantage of unsophisticated shareholders. Gossip columnists Suzanne Carbone and Lawrence Money of The Age called him a "ight-fisted share-scammer", He has also been described as an "..indefatigable bottom feeder" by Ian Porter and Nabila Ahmed of The Age In general, no law has been broken by Tweed in advancing his offers. Several shareholders who had accepted Tweed's offers annulled the contract due to technicalities in the off-market transfer process; however, the great proportion have performed their contracts by transferring their shares. Tweed has sued to enforce performance of agreements signed, often for minor amounts of less than $1000. These cases are usually settled in his favour. To foil his offers several measures have been attempted. Companies have tried to close their share registers citing National Privacy Principles (NPP) or providing them in a non-machine readable form (to make it difficult for Tweed to easily create offer letters); Regulatory changes in 2003 required that unsolicited offers to buy shares needed to prominently show the last known market price of the shares in question. The fact that Tweed has been able to continue his business since then indicates that people are (or should be) aware that they could get a better return by selling their shares on the stock exchange but instead choose the convenience of accepting the offer put in front of them by Tweed. Other companies, not associated with Tweed, such as Hassle Free Share Sales Pty Ltd registered to Ms Suzanne Forster, and Share Buying Group Pty Ltd, have recently entered into the discount share offer business.Securities laws contraventions
Tweed's offers have contravened securities regulations on two occasions. Each time Tweed was ordered to allow the accepting shareholders the opportunity to withdraw from their contracts.
In September 2003, the Federal Court of Australia found that the first instalment offer Tweed made was misleading. He had offered to purchase shares in OneSteel for $2 a share over a 15-year period through his company National Exchange Propriety Limited. At the time the accounting group KPMG calculated that this valued the shares at just 78 cents in today's dollars. The Court found that there was no false statement in the offer, the proposed payment of the purchase price over time in instalments had not been made sufficiently prominent. Tweed subsequently amended his offers to fix this deficiency.
In 2004 the Federal Court found that an offer made to shareholders in Aevum breached the law because it had not been dispatched with sufficient speed and also that it had not been expressed to be open for at least one month. The Court found that although there was no express requirement to keep the offer open for a month, such a requirement could be implied into the legislation.
Court actions by Tweed
Australian law allows for anyone to obtain a copy of a company's share register upon payment of a "reasonable fee". Companies had adopted the practice, not just with Tweed but with everyone, of charging high amounts for their registers in an effort to dissuade people from requesting copies.
In 2005 Tweed commenced an action against IAG alleging that the $46,000 which it had charged for a copy of its register, provided on a single CD rom, was not reasonable. The matter was settled before trial, with IAG repaying the $46,000 to Tweed plus court costs.
In 2008 Tweed commenced a similar action against AXA which had charged $17,000 for its register, again provided on a single CD rom. The Federal Court found that a reasonable fee was $250 and ordered AXA to refund the balance. The decision was appealed by AXA but the finding of the trial judge was unanimously upheld by the Full Federal Court.
Other companies have tried to make their registers difficult to use. Tweed commenced action in the Federal Court against one such company, ING, alleging that what had been provided was not a copy of the register as required by law. The matter was settled before trial with ING providing a replacement register and paying Tweed's court costs.
Other Business
Through his company National Exchange, Tweed attempted to gain control of Clime Asset Management in 2005 through 2006, as well as calling extraordinary general meetings (at Clime's cost) to have the board of directors of the company removed. At one point Tweed offered to be bought out of Clime at their net tangible asset value, which Clime refused to do. However, this attempt was halted by ASIC in August 2006, who raised "serious objections to the way the bid was structured" by Australian Share Purchasing Company Pty Ltd (ASPC) and threatened legal action if the takeover bid continued. ASPC withdrew from the takeover soon after.
Below market value offers
Offer made by companies associated with David Tweed include:
- An offer dated 2006-09-05 from DSPC to Coles Myer (CML) shareholders made an offer to buy shares at $7.50 each, only 54% of their market value.
- An offer dated 2006-10-06 from the Australian Share Purchasing Corporation offered $1.50 for AWB Limited Class B shares, which were valued at $2.71 on that date.
- An offer dated 2006-10-08 from DSPC to Rinker shareholders, offered $8.50 for shares currently worth $14.34, 60% of the market value.
- An offer dated 2006-12-10 from DSPC to purchase BHP Billiton shares at $18.00, 70% of their market value.
- An offer dated 2007-01-21 from Colonial Capital Corporation Ltd (CCC) to purchase AMP shares at NZD 6.00 when the market value was NZD 11.74 (51% of the market value)
- An offer dated 2007-05-01 offering to purchase Tower Australia Group Limited shares at $1.75NZ when the ASX valued them at $2.88NZ
- An offer dated 2008-02-20 from ASPC to Origin Energy (ORG) Shareholders offered to buy shares at $5.50 each, whilst stating the 'market value of original share' was $8.37.
- An offer dated 2008-03-02 from ASPC offering to purchase AMP shares at $5.35 when then ASX valued them at $8.05
- An offer dated 2008-04-30 from ASPC offering to purchase RIO shares at $100.00 when the ASX valued them at $136.08
Investment history
In December 2005 he made an offer (through his companies NSPC, DSPC and ASPC) to purchase IAG shares. NSPC offered shareholders $8.10 per share, paid out over 18 annual instalments of 45 cents per share. This meant that shareholders would have received the final payment in 2023. DSPC made an offer for $3.00 per share and another for $3.50 per share. According to IAG this was less than the lowest price at which IAG's shares have traded in the past year.
In 2006, Tweed changed tack slightly and offered investors $13 per share, while the price was $8.91. However, he offered to pay them the $13 in 20 annual instalments of 65 cents per installment. This allowed Tweed to take advantage of the time value of money, while disadvantaging investors. He also wrote to AMP investors offering them $13 per share, while the price was $8.91. In a similar way to previous offers, Tweed offered to pay them the $13 in 20 annual instalments of 65 cents per installment. In a letter dated 11 November 2007 Tweed's company Colonial Capital Corporation offered to buy BHP Billiton shares at a price of $42.47. Similar to offers mentioned above, payment was to be in 18 instalments of $2.36.
Other companies, not associated with Tweed, such as Hassle Free Share Sales Pty Ltd registered to Ms Suzanne Forster, have more recently entered into the discount share offer business. For instance, in a letter dated August 3, 2009, they offered to purchase IAG shares for $1.51, and in accordance with the Corporations Law, admitted that the market value of the shares was $3.67. They also offered to pay the costs 10 days after the shares were sold to them.
References
- Suzanne Carbone and Lawrence Money, "Same old Dave", 5 April 2006, The Age
- "Offer to suit half-price Tweed" , The Age
- The Commonwealth Bank was accused of doing this. On their website they wrote "National Exchange has alleged that the was provided in an unsuitable format. The Bank believes that it has complied with the requirements of the law in providing its share register data, and will be vigorously defending the action." "Legal action by National Exchange", 11 September 2003 - Commonwealth Bank of Australia
- Transcript of Inside Business - 27th November 2005
- Australian Securities and Investments Commission, ASIC stops flawed takeover by David Tweed for Clime Capital. Press release, Wednesday 9 August 2006.
- IAG Shareholder Warning about DSPC and NSPC
- ^ Craig Binnie (27 July 2006), "Government still won't act on Tweed". Herald Sun.
External links
- "Not the full quid", Sydney Morning Herald, 13 December 2005.
| Companies owned by David Tweed |
|---|
| ‡ Country Estate and Agency Company |
| ‡ National Exchange Corporation |
| ‡ Australian and New Zealand Exchange |
| ‡ National Share Purchasing Corporation Pty Ltd (NSPC) |
| ‡ Direct Share Purchasing Corporation Pty Ltd (DSPC) |
| ‡ Australian Share Purchasing Company Pty Ltd (ASPC) |
| ‡ Prudential Nominees |
| ‡ Colonial Capital Corporation Limited (in New Zealand) |