It read: “The directors do not believe they currently have relevant information to enable them to qualify or value the approach but should this change will advise the market accordingly,” David Jones said in its statement. ”In the meantime, the directors recommend that shareholders treat related market comment cautiously.”
At the time, David Jones did not release the name of the bidder or the amount of the bid. The retailer’s shares jumped 20%.
Whether or not to disclose the bid was always going to be a difficult call, analyst Peter Esho from CityInvest tells LeadingCompany. “If they chose not to disclose it, there would have been the possibility of rumours flying around the market and the financial repercussions around that,” he says. “I think they chose to disclose but make it very clear from the beginning that the party making the bid had many questions to answer. I think they did the right thing.”
However, the statement had less than all the information the retailer’s board had at that date.
The second statement
Later on Friday, the board issued another statement as more information came out in the media. The bidder was named and the price revealed at $1.65 billion. David Jones board stated that it had revealed everything it knew about the approach.
Ramsay says this was “seriously inadequate”, but the board made it clear that it was all the information that it had. “No further details in relation to the proposal have been provided,” the statement read.
By the end of Friday, David Jones’ share price finished up 14.6%, after peaking 20% higher than Thursday’s close. It was the highest one-day gain for the retailer in 17 years.
The trading halt debate, and the unravelling of the bid
Within four days of the bid becoming public, journalists had tracked down the bidder, his location (a post office box), other apparently strange business ventures in which he had been involved including reported claims of selling a $5.3 million bottle of ‘halal’ vodka. After the flurry of media attention the bid received on Friday, John Edgar then contacted the newspapers.
Asked how the media could discover more in four days than David Jones could discover in the month since the first offer, Ramsay says that the bidder began giving interviews when the story broke.
Edgar had, but this time, approached a public relations agency to put his own slant on the portrayal of the deal.
And he got his wish, it seemed. Most major papers carried interviews with him on the Monday, where he stressed the deal was not a hoax.
“We didn’t anticipate such a fuss,” he told The Australian. “It has come as quite a surprise for us. We are quite taken aback by it. But that’s how the market works.
“We think our bid is a good bid. It works on a technical and practical level,” he said. “We have put a lot of work into it and would like to engage further.”
Finally, on Monday, David Jones went into a trading halt after its shares lost 5.41% in early trade.
Sheehy tells LeadingCompany he doesn’t know enough to make a judgement on whether David Jones should have gone into a trading halt earlier.
However, he offers in-principle support for trading halts when there is incomplete information.
“A nonconventional bid, rumours on blogs … that’s not a fully informed market,” he says. “In those situations it’s perfectly reasonable for the company to request a trading halt.”
Ramsay says companies are very nervous about trading halts. “They fear the company’s reputation will take a hit,” he says. “It was a difficult call, and now, when we see all that occurred in the market – the share price goes up, the speculation, the lack of proper information – it would have been preferable to [go into a trading halt earlier] with the benefit of hindsight.”
And then, yesterday, the bid was withdrawn. The company came out of a trading halt, and investors wiped out most of Friday’s gains.
Ramsay says there are questions for regulators to answer: “There are going to be important questions for ASIC and the ASX about whether was it ever a credible bid … how the information leaked to the blogger, and why the bid was withdrawn,” Ramsay says. “The bidder says that it was withdrawn because of the publicity and at the same time he has a public relations firm in Sydney. Should we be taking some of the pressure off companies around continuous disclosure?”
Esho says the lessons are not for companies or for regulators, but for investors. “Perhaps there is room to help companies clarify such responses, in the digital age, should they be unsure to disclose or not,” he muses. “But buying shares on the back of what seems to be an odd offer is a risk that investors take upon themselves.”
