David Tweed
From Wikipedia, the free encyclopedia
David Tweed is an Australian who obtains financial gains by 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.
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[edit] Early and personal life
Born as David Tschernitz, he was the son of an Austrian migrant from Williamstow. He was educated in Essendon Grammar in the early 1980s. Tweed's first job was as a "runner" for a brokerage firm and according to Peter MacLaren, his former boss, he changed his surname to Tweed when he was promoted to the trading room under the belief that it would assist his career.[1] This name was taken from the name of a business journalist and sharemarket analyst who had temporarily left Australia to work in Europe.[1] His original house doubled as his office and was in Roden Street, West Melbourne, however he has since moved into the city.
According to the Herald Sun, Tweed lives in a de facto relationship with Donna Newman and they have three children. The Sun also alleges that "Mr Tweed has been ostracised by his family, who have begged him to stop his unscrupulous behaviour" but is defended by Ms Newman's father Dennis, who has said that,
- "If people have got shares and they have no idea what to do with them, then maybe they are better off without them. Let people who can look after them look after them. I know that sounds very callous but . . . he's not breaking any laws."[2]
[edit] Investment strategy
| 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 |
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 share register of target companies, he has made several offers to purchase shares in those companies. The offers are often far below the market prices that could be realised on the Australian Stock Exchange (ASX). For instance, when AMP was trading at around A$13, Tweed offered A$2.50 for the shares. Tweed's offers would often be in the form of a cover letter with large font detailing his offer and with an enclosed off-market transfer form that was pre-filled with the details of the target shareholder. A large number of shareholders, often elderly people who had never owned shares before, would take up the offer despite the market price clearly available in newspapers such as The Sydney Morning Herald and The Australian Financial Review.
Tweed has been accused of unethical behaviour and of taking advantage of unsophisticated shareholders. Suzanne Carbone and Lawrence Money of The Age called him a "[t]ight-fisted share-scammer" [3], while David Elias, also of The Age, called him "a man with no conscience".[4] The Sydney Morning Herald reports that Tweed once stated that "I didn't do morals at school." [5] 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 were relieved of their shares. Tweed has also sued to enforce performance of agreements signed, often for minor amounts of less than $1000. These cases are usually settled in his favour, to enable the former shareholders to avoid the legal costs of mounting a defence.
To foil his schemes, 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[6]); a court case in 2003 required that all offers that Tweed advanced would need to attach the last known market price of the shares in question.
In each instance, rather than retiring his scheme, Tweed has fought back. The share registers are a matter of public record, and Tweed brought action through the ASX listing rules against companies that attempted to close their registers. When required to advertise the market prices of the shares, Tweed began advancing offers to buy the shares 'in installments' so that people ignorant of the time value of money would not be able to easily evaluate whether to keep or sell their shares.
[edit] Investment history
In September 2003, the Supreme Court of Victoria found that Tweed's offer to purchase shares from investors in OneSteel was deceptive. He had offered to purchase them 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. In his ruling, Justice Robert Osborne stated that the National Exchange acceptance form was so worded that before it could enforce a binding contract on people tempted by low-ball purchase offers, they had to send in the shareholder registration number as well as the signed form before the deadline set out in the offer. The court action was undertaken by David Tweed against David Vane, a caretaker whom he took to the court to claim $977. [7] [8]
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. [9]
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. [10] 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.[11]
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.[12] 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.[12] Tweed took AMP to the Australian Federal Court alleging that they unfairly sold his company, Direct Share Purchasing Corp, the share register for an inflated figure of $44,000. Tweed believed that he should have been sold the register from between $231 and $750 and that it was against the Corporations Act to have charged a figure he believes was too high.[13]
A letter dated 5th September 2006 from DSPC to Coles Myer (CML) shareholders made an offer to buy shares at $7.50 each, only 54% of their market value.
A further offer dated 8th October from DSPC to Rinker shareholders, offered $8.50 for shares currently worth $14.34.
An offer dated 6th October from the Australian Share Purchasing Corporation offered $1.50 for AWB Limited Class B shares, which were valued at $2.71 on that date.
DWA
[edit] Notes
- ^ a b "Tweed feeds on the vulnerable" (December 11, 2004), The Australian
- ^ Craig Brinnie (July 25, 2006), "Partner under investigation"
- ^ David Elias, "Tweed feeds on the vulnerable", December 11, 2004, The Age
- ^ David Elias (December 30, 2004), "Tweed finds profit preying on old folk", Sydney Morning Herald
- ^ The Commonwealth Bank was accused of doing this. On their website they wrote "National Exchange has alleged that the [bank's shareholder register] 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
- ^ Michael Rowland (September 10, 2003), "Federal Court deals blow to share trader David Tweed", ABC Radio's PM
- ^ David Ellis (October 24, 2003), "Accidental hero defeats David Tweed", Sydney Morning Herald
- ^ IAG Shareholder Warning about DSPC and NSPC
- ^ 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.
- ^ a b Craig Binnie (July 27, 2006), "Government still won't act on Tweed". Herald Sun.
- ^ Vanda Carson (July 12, 2006), "Tweed alleges AMP overcharged", The Australian.
