Investors were today warned to beware of unsolicited offers to buy shares, after the Australian Securities and Investments Commission (ASIC) reported a significant 51 per cent increase in reports about these types of offers over the last 12 months.

Shareholders in AXA Pacific Holdings Limited and Tattersalls Limited have been recent targets of these offers.

ASIC Commissioner Professor Berna Collier said ASIC had received complaints relating to unsolicited offers from over 10 different entities, which were contacting hundreds, often thousands, of shareholders by mass mail-out.

‘These offers are on the rise and investors risk losing money by selling their shares for less than they could get on the open market’, Professor Collier said.

‘Although it is not illegal to make an unsolicited offer to buy someone’s shares, it is against the law to mislead or deceive shareholders into accepting an offer. Further, the offer must comply with strict legal requirements, including the prohibition against misleading or deceptive or unconscionable conduct’, she said.

‘ASIC is monitoring various current offers to ensure they comply with the law, but we also want to warn the public about how to protect themselves’, Professor Collier said

‘ASIC has found that inexperienced or elderly shareholders, or those under immediate financial pressure, are most at risk of signing away their shares without carefully reading the offer and taking the time to make a few important safety checks’, she added.

Seven safety checks to protect yourself

1. Who is making the offer? Read the offer carefully to see exactly who is making it. Some offers have used official looking letterhead, or names that sound like your company or a stock exchange, and may be sent at the same time as a company’s own letters to shareholders. If you’re not sure, phone your company’s investor relations department to double check.
2. Why is the offer being made? Naturally, the company or person making the offer wants to make money. Perhaps there is public information about something that is expected to happen to your shares that you may not know about. For shares traded on the Australian Stock Exchange (ASX), check company announcements on the ASX website www.asx.com.au, or talk to a stockbroker in case you have lost touch with important news that’s been released to the market.
3. Do you really need to sell immediately? Unless you really need the money now, you may do better by holding on. If you do need the money, consider all of your options. The Corporations Act sets time periods in which an offer once made, cannot be withdrawn – use this time wisely.
4. What’s the market price for your shares? Get an up-to-date market price for your shares and compare it with the price being offered. Market prices can change daily, so check the most recent price for your shares on exchange websites, daily newspapers or quick phone call to a stockbroker. If you hold shares that are not sold on the ASX or any other exchange, the offerer needs to state the fair market value in the offer document. You will then need to make a personal judgment about what they are really worth. As a shareholder, you are entitled to talk to the company you own the shares in about its plans, including possible listing on an exchange. Maybe other shareholders in your company would like to buy directly from you?
5. How much is the offer really worth? Watch out for two types of ‘low-ball’ offers. The first type offers significantly less than the share’s market value. The second type offers to pay you by instalments spread over many years. With this offer, even if the total offer price is higher than the present market value, the many years you may have to wait for all your instalments means you usually get far less than selling on the market.
6. Compare the cost of selling on the market. Even if you hold only a very few shares, you can still sell through a stockbroker. Non-advisory brokers will sell the shares for about $55-65 over the phone, or about $30-45 over the internet. Read the offer to see if you must pay any fees or charges, and compare this with the return you would receive if you sold the shares yourself.
7. Be careful – consider getting advice. Anyone making an unsolicited offer to purchase your shares cannot possibly know your financial circumstances, and therefore cannot give you financial advice. Further, you may face immediate taxation consequences if you accept an offer payable in instalments over time. Consider getting independent advice from a licensed financial or taxation adviser or stockbroker before agreeing to sell your shares.

To report an unsolicited offer which you believe is misleading or deceptive, or is otherwise against the law, you may lodge a complaint via our website at www.asic.gov.au or by writing to any of our capital city offices across Australia:

Manager
National Assessment & Action
ASIC
GPO Box 9827
IN YOUR CAPITAL CITY