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BCS - BrisConnections Unit Trusts

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quinn123

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I saw this the other day:

Many small time investors in the recently floated company Brisconnections could face financial ruin after discovering the shares they purchased are to be paid for over three instalments. Many investors bought into the company when the share price plummeted from $3 to just a mere tenth of a cent believing they were snapping up a bargain. Now, investors face bills running into millions of dollars when the next dollar per share payment is due in April, a liability they claim was never spelled out to them.

I'm new to shares and don't quite understand this "dollar per share payment"? Is it becasue the company was recently floated?

My main concern is I plan to invest in shares and wasn't aware of these types of risks. I thought the only risks involved were the share price decreasing and the possibility of the company going into liquidation.

E.g. If I was to invest in some ordanary shares in BHP is there any contract for the shareholder relating to those particular shares? And if there is how would you find that information.

Thanks
 
Re: Brisconnections shareholders - financial ruin

It's a case of Trusts or Stapled Units VS Fully Paid Ordinary

So they bought into BCSCA - BRISCONNECTION TRUST CTG
Whereas, something like BHP - BHP BILLITON LIMITED FPO

I think if you stick to the FPO (fully paid ordinary) shares, you should be fine, however, will let others with more experience answer this one.
 
Re: Brisconnections shareholders - financial ruin

Oh ok, makes sense.

Its a worry that some of the people investing in that company were not aware of this...

I have another question :confused:. Is there a cheap way to average down? Or do you just have to accept the brokerage fee every time you trade?
I will be using commsec to do my online trading.

Thanks for quick reply.
 
Re: Brisconnections shareholders - financial ruin

There was another thread about this I started recently.

The long and the short of it was that 5 letter shares always have money owing on them, so just be careful buying anything with 5 letters?
 
Re: Brisconnections shareholders - financial ruin

Truly a nightmare for those that weren't aware of the $1/share installments.

Brisconnect CEO claims that it fully disclosed the installments in the PDS, their website, etc and everyone 'should' have been fully informed.

I guess the problem is that how do you inform traders about the installments after the stock is trading on the ASX? How do you inform them BEFORE they purchase?

It would have been easy to purchase 500,000 shares at 0.1c for $500... but then u realise that you're up for at $0.5M when the installment comes.... scary thought!
 
Re: Brisconnections shareholders - financial ruin

Sunder said:
There was another thread about this I started recently.

The long and the short of it was that 5 letter shares always have money owing on them, so just be careful buying anything with 5 letters?
Click to expand...

Actually, some 5 letter shares can be Preference shares which rank ahead of common shares in the case where the company goes down. For example, SUNPB.
 
Re: Brisconnections shareholders - financial ruin

Options are also five letter codes; with options if things go pear shaped, you just let them lapse; in the case of instalments, you either have to sell them (if you can!) or you are fully liable to pay them out, you cannot let them lapse.
 
Re: Brisconnections shareholders - financial ruin

Prospector said:
Options are also five letter codes; with options if things go pear shaped, you just let them lapse; in the case of instalments, you either have to sell them (if you can!) or you are fully liable to pay them out, you cannot let them lapse.
Click to expand...

However, if wanting to trade options or warrants, you have to get special trading approvals with your broker stating that you have at least read the relevant ASX booklets which goes through all the different types of warrants & options available and explains any obligations.

I don't see why the the ASX doesn't also prevent traders/investors from trading these types of instalment products and require potential purchasers to get special approval from their brokers where they are pointed to the relevant material explaining the risks before doing a few easy mouse clicks and potentially ruining the rest of their lives.

And this type of product appears to be far more risky than most standard options and warrants.

The sad part is that, because BCSCA have been so cheap, those with small trading accounts trying to get ahead are attracted to these low priced products - and they are the ones who can least afford a mistake of this magnitude.
 
Re: Brisconnections shareholders - financial ruin

sails said:
However, if wanting to trade options or warrants, you have to get special trading approvals with your broker stating that you have at least read the relevant ASX booklets which goes through all the different types of warrants & options available and explains any obligations..
Click to expand...

Nope, when I bought FMSOA I did nothing different to any other share trade. Through online trading, which is where most people trade shares these days. One of the pitfalls I guess.
 
Re: Brisconnections shareholders - financial ruin

Prospector said:
Nope, when I bought FMSOA I did nothing different to any other share trade. Through online trading, which is where most people trade shares these days. One of the pitfalls I guess.
Click to expand...

Were they company options? If so, they are handled differently to Exchange Traded Options. It is the ETOs where you have to jump through a few hoops before you can get approval to trade.
 
Re: Brisconnections shareholders - financial ruin

Just a quick question

Will this involve the holders having to get rid of all their personal assets to try and meet these legal obligations?
 
Re: Brisconnections shareholders - financial ruin

mazzatelli1000 said:
Just a quick question

Will this involve the holders having to get rid of all their personal assets to try and meet these legal obligations?
Click to expand...


If they are the registered holders of the warrants when the installment falls due, then as I understand it they are legally obliged to pay the installment.

So by not paying they would have a legally enforceable debt and can be pursued through the courts for the full amount. If they fail to pay I assume the next step is asset seizures and bankruptcy.

Now, given that buying just $500 worth of these at the recent .001 price effectively creates a $500,000 obligation when the first installment is due, its pretty likely that the majority of people that purchased these recently would face extreme financial hardship under that scenario.
 
Re: Brisconnections shareholders - financial ruin

mazzatelli1000 said:
Just a quick question

Will this involve the holders having to get rid of all their personal assets to try and meet these legal obligations?
Click to expand...

Well Mazza think of it this way...

The underwriters are Macquarie Bank and Deutche Bank. Aren't those two companies really well known for their generous and forgiving natures?

OK jokes aside I saw it stated somewhere that the underwriters will pursue payment from shareholders.
 
Re: Brisconnections shareholders - financial ruin

cuttlefish said:
If they are the registered holders of the warrants when the installment falls due, then as I understand it they are legally obliged to pay the installment.

So by not paying they would have a legally enforceable debt and can be pursued through the courts for the full amount. If they fail to pay I assume the next step is asset seizures and bankruptcy.

Now, given that buying just $500 worth of these at the recent .001 price effectively creates a $500,000 obligation when the first installment is due, its pretty likely that the majority of people that purchased these recently would face extreme financial hardship under that scenario.
Click to expand...

Geez, that is extraordinary !!!
Well i guess seizing retail investors money is better than having to fork out their own (Macquarie)
 
Re: Brisconnections shareholders - financial ruin

Sir Osisofliver said:
Well Mazza think of it this way...

The underwriters are Macquarie Bank and Deutche Bank. Aren't those two companies really well known for their generous and forgiving natures?

OK jokes aside I saw it stated somewhere that the underwriters will pursue payment from shareholders.
Click to expand...

Yes well logically one would assume if it is legally binding then the personal assets will come under attack

But as I have seen discussion from others about whether ASX and ASA will step in, I was wondering if any new developments will abstain the retail holders from these instalments.

As you and cuttlefish suggest, they aren't so lucky......
 
Re: Brisconnections shareholders - financial ruin

Definitely one harsh lesson for those willing to gamble on the sharemarket in the pursuit of a quick buck.
 
Re: Brisconnections shareholders - financial ruin

Simple answer is this:

Set up a $2 shelf company. Process costs about $1000

Do an off market transfer of shares to that company.

The day the installment comes due, declare the company as insolvent and unable to service its debt.

As its director, you did your due diligence to declare as soon as it was known that the company could not meet its obligations, and liability is limited to the original $2.

Heck, you can even get people to pay you to take the shares off their hands, and draw a directors fee before the installments are due :p

Somehow, I doubt people would get away with this, but I'd say there'd be some catch-all fraud law, instead of a specific law that prevents them doing this.
 
Re: Brisconnections shareholders - financial ruin

If the share code contains more than three letters it's a good idea for the investor to investigate what the extra letters represent prior to purchase. Information on the partly paid nature of these securities is available on the ASX's website.

That being said I'm left to wonder how trading can be allowed to continue in these securities given that the market can't actually determine a value for them in their present form.

Perhaps the answer is to allow them to trade at a negative value relative to the current instalment level. That though would require some big flashing warnings on broker sites prior to purchase.
 
Re: Brisconnections shareholders - financial ruin

korrupt_1 said:
Brisconnect CEO claims that it fully disclosed the installments in the PDS, their website, etc and everyone 'should' have been fully informed.
Click to expand...
BCS Chairman Rowe actually misled the public. I remember within the first few days of listing, when BCSCA was trading below 50c, Rowe told AFR that BCS was great value because dividend yield had went up from 14% to 28%. Clearly, the denominator he used was $1, not $3. Was he really that dumb or just being irresponsible?

And this guy is a director of ASX, as well as chairman of Queensland Investment Corporation, an AM too. Talking about irony.
 

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