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Did a huge mistake - bring me your lights please

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ronnieling said:
Did you catch the announcement this morning?

The 5.95c distribution has been cut to 0.05 of a cent and postponed until after the second installment is due.

Any takers for my ~50 000 odd securities?
Click to expand...

Wooo

Glad to have been on time for selling all this ****. I don't know where management want to go, but if they don't change their mind at some stage, that will be a real nightmare!!

Good luck my friend. You still have time to sell, if someone is as naive as we were.
 
This person may have done a greater mistake than yours...

From the Sydney Morning Herald

How will Mrs He find the $65m?
* Scott Rochfort
* November 10, 2008


A $32,300 investment made by a Melbourne housewife threatens to create a headache for the toll road group Brisconnections and the underwriters of its next two $408 million security instalments, Macquarie Group and Deutsche Bank.

Brisconnections remained unclear over the weekend whether its newest substantial shareholder, Mrs Fang He, would be able to cough up $65 million to fund the toll-road's next two $1 security instalments.

The company was caught off guard on Friday by a shareholder notice which showed Mrs He had snapped up 32.3 million securities, or a 8.26 per cent stake in the company, at 0.1c each.

The stake cost $32,300, or one-thousandth of the July listing price of Brisconnections' first instalment. But for the next two instalments, Mrs He is obliged to pay the initial listing price of $1.

When contacted by the Herald, Mrs He was unable to say if she could fund the instalments.

"I am only a housewife. My husband is running this business in my name," said Mrs He, who jointly owns the business Wang & He Investment with her spouse. Her husband did not return calls.

The investment makes Mrs He the toll road's second-largest shareholder behind the Queensland Investment Corporation.

The purchase means Mrs He is obliged to buy 32.3 million of the next two $1 instalments. Mrs He, who has registered her shareholding from the address of an aluminium window business in the Melbourne suburb of Springvale, will need to pay $32.3 million when the second instalment is payable on April 29, then $32.3 million when the final instalment lists in early 2010.

In all, Brisconnections plans to raise an extra $817 million from the next two instalments to help fund the $4.8 billion toll road project in Brisbane.

"All shareholders who have bought into the stock would be fully aware of their obligations in respect to the second and third instalments," a Brisconnections spokesman told the Herald.

The spokesman said the company had "no reason to believe at this stage" that any of its shareholders could not fund the next two instalments.

If the instalments cannot be fully funded by securityholders, Macquarie Group and Deutsche Bank, as the underwriters, will have to make up any shortfall.

Construction of the toll road project started last week.


http://business.smh.com.au/business/how-will-mrs-he-find-the-65m-20081109-5kvl.html
 
My Goodness!!!
Do they know what they are doing???
Hopefully yes!! Otherwise good luck!!

Benhua... feeling so comfortable in his chair now...
 
This is either being misreported, or ASIC and the ASX are getting extremely sloppy imo.

How can the act of purchasing a listed asx stock incur a binding liability on the new holder without any sort of product disclosure statement or other documentation?

Given the hoops that have to be jumped through to be able to trade derivatives like CFD's, options, futures etc. it seems ludicrous that someone can find themselves in a legally binding liability of such magnitude just through the act of purchasing listed stock.
 
Well from my reading of the product disclosure statement there is a legally binding liability to holders of the units as of the time of the installment payments and they will pursue the holders that don't pay for the outstanding amounts. So the article isn't misreporting it.

imo it is highly irresponsible of the ASX to allow this instrument to be listed in this form. Does anyone know of any other asx listed securities that have a binding liability attached to them like this? If it was an optional installment and the instrument forfeited if the payment not made that would be another matter but this does not appear to be the case here - it appears the holder at the time of the installment payment falling due has full liability.
 

Cuttlefish,

There are HEAPS of companies that use a stapled structure. Anything that has a 5 code as opposed to a 3 code is a stapled security. (Mind you this isn't a hard and fast rule as most of the debt hybrids also use 5 codes)

5 code 3 code
EG TLSCA vs TLS

With these types of stapled plays, they ALL require the holder at the time of instalment to pay the moola. Connecteast, transurban, maquarie airport, rivercity etc etc etc

The only stapled I ever went for was the TLSCA (T3's).Why?

Because I could get double the yield on the same investment. Hello 15% grossed up yield.


Sir O
 
Cheers Sir O - you are correct - I never realised that there was not just an option to pay the installment but a binding obligation.

There's actually another thread on this topic as well which I've been posting in ... here:

"So what happens when you buy an installment warrant"
https://www.aussiestockforums.com/forums/showthread.php?t=13297


Maybe the mods could close this one as the other one is probably titled more appropriately and then we'll only have one thread.
 
Pay thousands and owe millions


* Scott Rochfort
* December 1, 2008
*

BRISCONNECTIONS has rejected pleas for it and its underwriters to provide a reprieve to retail investors who have unknowingly exposed themselves to millions of dollars in liabilities after snapping up securities in the listed toll road.

After the plunge in the first instalment in the company from $1 to 0.1 cent since its July listing, retail investors have been able to buy large slabs of the company for small amounts of change.

The only problem is that for every security purchased for 0.1 cent, security holders still have to fund the next two $1 instalments in the company.

Apart from the appearance of two retail shareholders with a collective 20 per cent stake worth about $80,000 with a further $160 million of obligations, BrisConnections has found itself with several highly distressed security holders on its register.

"This is of a magnitude that I can't possibly deal with," one security holder who asked not to be named told the Herald.

"I feel lost. I don't know what I should do at the moment," she said, after discovering only after she made her $1000 investment in the company that she had also purchased a $2 million liability.

The investor conceded the investment was a "stupid mistake" and said she was given no warnings of her obligations when she made the purchase online.

It appears she is not alone.

"We've been contacted by a number of BrisConnections security holders who are beside themselves because of the amount of debt they have taken on board," said Stuart Wilson, the chief executive of the Australian Shareholders Association.

Mr Wilson said urgent action needed to be taken to ensure online brokers such as Commonwealth Securities and E"additional safeguards" that let would-be BrisConnections investors know of their obligations.

Given the growing base of retail shareholders in BrisConnections, there is speculation the underwriters - Macquarie Group and Deutsche Bank - of its next two instalments, worth $817 million, might have no choice but to buy out the toll road with the remaining institutional shareholders.

The instalments are due next April and in early 2010. But at the weekend, BrisConnections continued to hang tough.

"We're not going to start being an apologist for people who don't do their research on this," said a BrisConnections spokesman.

The spokesman said investors who purchased BrisConnections stock without seeking advice were "playing Russian roulette". "It has been the unspoken law of investing since day one," he said.

It appears that BrisConnections security holders would have difficulty selling their shares. There were no trades in the stock on Friday and it is believed Evestors from buying the company's shares.

CommSec said it made no apologies for not warning investors of their obligations.

"While we are concerned about the purchaser's position, the decision to acquire the stock was made by purchaser," said a CommSec spokeswoman in an email to the Herald.

"BrisConnections' ASX Code - BCSCA - indicates that it is a contributing share, it has only been partly paid for and that the shareholder is required to pay the balance outstanding," she said.

http://business.smh.com.au/business/pay-thousands-and-owe-millions-20081130-6nqp.html
 
The real problem with this one BCSCA is not that it is an instalment warrant, but there are no buyers for it.

In market depth this morning there are 95,000,000 for sale at an ask of .001, and no buyers. The people who bought this thinking they could trade out of the position are effectively stuck with the position.

brty
 
Wow, I have just shown this thread to my son who is 23 and just getting into shares. I see today that Mrs He has sold her shares, but the notice doesn't say who bought them. Given that she is the second largest holder, that seems strange.

The buy side is blank, the sell side is full! I am curious, when you try to buy these instalments through online trading, does a 'warning notice' tell you about the future liabilities? I dare not explore just in case my touch pad buys some!


Benhua, you really got out of jail; I think you owe these posters a good bottle of red!
 
The problems is because there is an obligation to pay the additional installment, especially at current prices this instrument effectively behaves more like a futures contract, rather than like an option or an equity.

Before people are allowed to trade futures, which are considered to be a more complex product, they are usually required to jump through a few hoops (fill in questionaires, sign statements saying they understand the risks etc.).
They are also required to lodge a margin, and their position size is typically limited in some way by the broker. None of these protections applied to the people that took positions in this instrument.

To me its unrealistic for the ASX or ASIC to expect that your average garden variety retail investor is going to read the fine print of the PDS on every single thing they purchase. I definitely feel sorry for those that have ended up in the situation of holding this instrument. In my view, to prevent this situation happening again, ASX should implement procedures that require margin to be lodged on instruments that have an additional binding obligation attached to them, and brokers should ideally limit the amount of liability a retail investor can take on via purchase of an instrument like this.
 

I have some sympathy for these people too, but just to see what info is offered before buying I did a unsigned placement of a Buy order. The fact that it's a stapled security is quite clearly stated on the order:

BRISCONNECTION TRUST STAPLED SECURITY PAID TO $1.00, $2.00 UNPAID
Last Price Today's Change Bid Offer Day High Day Low Volume Type
$0.001 $0.000 (0.00%) $0.000 $0.001 $0.001 $0.001 0 REAL TIME PRICES
as at 01 Dec 2008, 11:39:33 AM
Click to expand...

That's on E-trade, where if you click on "Recommendations" Huntleys make a very clear recommendation not to buy this.

Seems the broker has fulfilled all their obligations.
 
Guys, i read this a few days ago, a 26 year old is in a big mess of 94 million now.....

Another BrisConnections bolt from the blue
* Mark Hawthorne
* November 26, 2008

IN YET another potential disaster for listed toll roads operator BrisConnections, a 26-year-old Melbourne man who runs an IT company from a block of flats in St Kilda has become the company's latest substantial shareholder.

Nicholas Bolton, who is the owner of Australian Style Investments, bought 47,643,166 BrisConnections unit trusts, which have two $1 part payments still to be made on them. That means that Bolton's company will soon owe BrisConnections in excess of $94 million.

It's fair to say that Bolton doesn't have the $94 million to pay for the shares. He apparently used his $10 million margin lending facility with Commonwealth Bank to buy the shares. That margin lending account was opened in March this year.

Full Disclosure contacted Bolton last night to ask if he had the $94 million that BrisConnections will soon be chasing. The man who now owns 12.21% of the company, for an outlay of $47,600, sounded shell-shocked.

"I have no comment to make at this stage, but I will talk at a later date," Bolton said. He also confirmed that he bought the shares in an on-market transaction, and had not yet been in contact with BrisConnections.

BrisConnections started building a $4.8 billion Brisbane toll road to the city's airport this month. Investors paid an initial $1 for shares in June, and must pay shell out another $2 in the next 18 months to keep them. The shares are now worth just 0.1 ¢.

Last month, Melbourne housewife Fang He turned a $32,300 investment into a $65 million nightmare after snapping up 32.3 million shares of BrisConnections, or 8.26% of the company, at 0.1 ¢ each. BrisConnections company secretary last week told Full Disclosure that Ms Fang had sold her shares, and that a substantial shareholder notice was "imminent".

Bolton's shareholder notice was released to the market after the close of business last night. BrisConnections' company secretary did not return phone calls.
 

Buying cheap stocks is like buying other things that are cheap - they're rubbish. When you trade in stocks worth a fraction of a cent, you are basically a fraction of a cent from broke. These stocks attract the least of experienced day traders who hope to make a quick buck. The questions you should be asking yourself before buying such stocks is:
1. what is my risk for the trade?
2. where is my breakeven level for the trade?
2. where will I get out?
3. what is my timeframe for the trade?
4. what is the risk worth the potential reward? - (it usually won't be)

The key to all successful trading is consistency. Repetition. If you can repeatedly pull money out from such markets, you've found your edge.
best regards
 

I'm not game to do the same in case I have a concentration lapse and inadvertantly buy some!

I agree that the brokers have fulfilled their obligations and I certainly wouldn't be putting the cause of the situation down to the brokers - I think its more an issue for the ASX. My view is that these instruments are risky and should be put into a different category. But in the interim anything that the brokers can do to try to protect clients is a good thing.

I don't know about others but although I've never traded warrants my impression of them has always been that they behave in a similar fashion to options - but with different conversion ratio's and other caveats that are detailed in the PDS's.

I've never thought of them as a product that carries a binding obligation. Even the title 'call warrant' to me implies similar behaviour to a call option. So I can see how people may not have realised that there is a binding obligation to pay the unpaid amounts.

The other thing that I question is what value is there for Brisconnection trust in having warrant holders that aren't able to pay? How is it going to benefit them or Macquarie, bankrupting a bunch of naive retail investors? Its not going to give either of them anywhere near the money they are hoping to get from the installment payments, and it is likely going to put individuals and there families through the misery of losing their homes and court hearings etc.

Wouldn't it be more productive for them to try to find a purchaser for the warrants that is actually willing to front up some money. Clearly nobody is willing to front up $1 or $2 for them but they might be able to find someone willing to take them up for 10c, 25c or 50c for example, which would probably give them 100 times (or even thousands of times) more money than they'll get from the retail investors that are currently holding them after purchasing them for fractions of a cent.
 
cuttlefish said:
I'm not game to do the same in case I have a concentration lapse and inadvertantly buy some! .
Click to expand...

Me too - I didnt want to go anywhere near the buy page - very brave Julia! :

I do feel very sorry for these people, I know they should have done their research but wow, what a penalty. A life changing event from three simple clicks!
 
Prospector said:
Me too - I didn't want to go anywhere near the buy page - very brave Julia! :

I do feel very sorry for these people, I know they should have done their research but wow, what a penalty. A life changing event from three simple clicks!
Click to expand...

with the ease of modern trading over the INTERNET and the ability for basically anyone with limited trading experience let alone the business knowledge to understand the future liability of purchasing these so called shares i think that as stated by cuttlefish that they should be listed in a similar manner to warrants and as such there should be some accountability shouldered by the institutions

people make mistakes the current openness to be able to buy shares without any real experience shouldn't leave you open to having your entire future fed into a meat grinder

i think there needs to be more control over these kind of instruments
i couldn't take on the liability of trading options without extensive applications to be able to do so and in like manner this type of instrument should be regulated more ....... imo.
 
Julia said:
What's the role of the underwriters here?
Click to expand...

Good point Julia. As I understand it Macquarie as the underwriters are obliged to meet the shortfall in any due installments. So I guess this means Brisconnection gets the money either way. Macquarie as I understand it will then pursue the holders of the warrants that haven't met their commitments.

So if there's any deal making to be done I guess Macquarie is the one with the motivation - though there's probably nothing to stop them doing a deal anyway and still pursuing outstanding holders. They're probably not thrilled about being stuck as the underwriters, but thats the swings and roundabouts of investment banking I guess.
 
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