Tuesday , July 5 2022

Raj Shorters: Why VGI's Rob Luciano became the number one dealer


In some parts of the Australian market, Rob Luciano is the number one public enemy.

A self-talking, short-selling couple, who publicly attacked the $ 3 billion company, leaving hundreds of retail investors guilty of wiping out 25 percent of the company's value. But Luciano does not care. He says this is just the beginning.

Culture on the Australian market is so much inclined that people are practically allergic to bad news, and leaves a large number of opportunities, he says.

He put a face on Corporate Corridor Management, which broke out two nights ago, Luciano made an accentuated debate about the merits of activist investors and short sellers on the front pages.

Luciano, a long-standing critic of the Australian Insular Committee, dissatisfied with the management and managers of institutional funds to process the index, does what little Australian investors have done before: it comes out of the shade to discuss why short sellers who earn when prices fall in the fall are a necessary part of the market. It's still coming.


"What we found is remarkable is that nobody cares if you mislead the minor investors into poorly prepared or perhaps wrongly conducted investigations that encourage the price of the stock to increase," he says. AFR Veekend.

"Everyone seems to be worried if research causes a decline in stock prices. Well, it's illogical to signal that Australian capital markets must evolve. Meanwhile, this is one of the reasons why there is a huge opportunity in Australia – because the market is so strongly stacked a short seller that creates extraordinary opportunities for VGI, which is the ultimate irony I suppose. "

Activist investors, whether on a short or long side, are always controversial.

Critics say that activists who decide to go public with their concerns at the worst trigger or, at best, speed up a process that can kill companies, forces them to lay off staff and close the divisions, often in order to make quick progress on the road. This is the opposite of what the market has to do, they say, to build and improve for businesses.

Activist investors, whether on a short or long side, are always controversial.

Activist investors, whether on a short or long side, are always controversial.

Peter Braig

Many argue that lobbying for change is the best and most effective behind closed doors. Consider the powerful $ 130 billion AustralianSuper industrial fund that goes on its way to telegraph its "friendly activist" approach.

But at the same time, Corporate Travel Management CEO Jamie Pherous desperately tries to reject VGI's "red flags" and proves that this is not the latest case of emperor's newer clothes, a financial service has fallen, the giant AMP is also facing a very public critique of Merlon's shareholder Capitala, who wants to reverse a decision of $ 3.4 billion to sell her life insurance business.

"For us, this is the worst thing we've ever seen. The issues are so significant," says Merlio's Hamish Carlisle, who says the sales announcement has provoked the largest single reduction in company value in the company over the last 15 years.

"We are not hedge funds or activists, we are long-term investors … to hear [AMP chair] David Murrai comments that activists have a different agenda and that the motives are not completely in line with the way we work. "

Executive Director of Corporate Travel Management Jamie Feros desperately tries to refute VGI's "red flags" and proves ...

Executive Director of Corporate Governance Jamie Feros desperately tries to reject VGI's "red flags" and proves that this is not the latest case on the new clothes of Cara's.

Ryan Stuart

An investor activist, a short seller: they are still dirty names in the local market.

"If you are a short seller in Australia, you are a pair," says Luciano, whose fund mainly makes his money from his long positions in companies such as the VD40 and Chicago Mercantile Exchange.

But depending on how AMP and Corporate Travel Management are traded, expectations are Australian companies that should be ready for much more public criticism by local investors.

"It's changing," says Hasan Tevfik of MST Financial, who says that the arrival of the US activist fund Elliott Investors in the BHP register more than a year ago, and her subsequent success in repressing the company to return equity to shareholders was "awakening" among Australian investors who usually prefer to work behind the scenes to lobby for change.

Hasan Tevfik of MST Financial says that active managers are under increasing pressure to justify fees.

Hasan Tevfik of MST Financial says that active managers are under increasing pressure to justify fees.

Louie Douvis

"The first round was a big opposition to Eliot, it was a little unknown, and Elliot won them. Elliot used the sources of extreme frustration … they [local funds] they did not know what the consequences would be. "

He adds another factor in the game: active managers are under increasing pressure to justify fees. Activating roles in lobbying companies around the capital structure and other issues can improve performance and differentiate their approach from passive investors.

Tribeca Investment Partners Craig Evans, whose fund has publicly announced a letter of criticism of BHP's capital management after Elliot, says they will again be public about their concerns with the company wherever it is needed.

"When we wrote a letter in which we expressed the views of our special investors about what companies should work together with Elliot who publicly make them, we took the support of Australian investors from large funds to small retail owners. There was a clear desire for action , but there was not a big desire to return the door as the largest shareholder, with the greatest possible influence, all were passive funds like Blackrock, State Street, Vanguard ETFs, or were the retailers directly, "he says.

Critics say that activists who decide to go public with their concerns in the worst trigger, or at best speed up the process ...

Critics say that activists who decide to go public with their concerns at the worst trigger, or at best speed up a process that can kill companies, force them to lay off staff and shut down parts

Greg Nevington

To date, the most complex public attacks on listed companies – either short or long-owners – are left to foreigners: it has now disbanded the American research company Glaucus zoning at Blue Ski Alternative Investments and the sandalwood group Kuintis and the American hedge fund Elliott Associates

In all these cases, outsiders publicly said what some local investors thought privately. Concerns about corporate travel have already been raised, though never in as much detail as VGI. In relation to BHP, one of the most common comments was that local investors raised similar problems, although they never had any traction.

Australian assets were active short-term companies that they believe are not being summed up or overestimated, although it is usually difficult to know which funds come from short-term funds.

Vocation, GetSvift and Slater & Gordon are just three examples. But even VGI, who was a short Slater & Gordon, did not publicly come out with a weapon that flared up in his post, even though he sent a similar report to his clients in a "red flag" that highlights their concerns in 2015.

Interestingly, Corporate Travel Management is not even the largest short VGI, although Luciano did not disclose that investment.

So why more investors do not keep the door on the long or short side if there is a potential to improve the return of investors?

Luciano – whose firm now faces the potential classic action of Maurice Blackburn, who says he is considering whether the VGI is involved in misconduct – says that jumping through legal loops is challenging, even if it is planned whether the report can be sent to retail investors on the list VGI's investment company (it can not, because they are not classified as wholesale investors), so they can be as well as better informed.

Australia's defamation laws are far more severe than those in North America. Sydney is now considered the world's largest defamation city. Although it is impossible to discourage a company with more than 10 employees, it's often difficult to drive an argument on how to improve value and strategy without direct criticism of individuals who are leading the job. Especially if there is a desire to keep staff on the side.

"The defamation law we have in Australia limits the letter of Dan Loeb, which makes the leadership and committee more difficult and critical for individual executives," Luciano says in a referendum on the legendary founder of the Third Point. "So I think the libel laws limit the way in which you conduct an activist campaign and you are handicapped by the ability of investors to take on a particular goal of management and board members who are accountable to shareholders.

"So, this is one of the reasons why we avoided activism here – laws make it difficult to really express your attitude and precise your problems on the market."

But there are other factors. Part of the reasons for staying in shadows is that it's difficult to clean the company, not without risk, says one fund manager who shares Shorts.

"We have fear of publishing information … potential return, natural mistakes," he says.

Ben McGarri Totus Capital agrees with the Hedge Fund.

"It's also fair for me to put things in negative or positive things, but I understand why people defend her from Australia, the laws of defamation and defamation make it difficult to say what is here. If you do not have your facts 100% true, there are significant shortcomings to negatively affect the company. You can potentially open court proceedings if there are factual inaccuracies, potentially you can exclude management access to companies. "

It's a small market, and often directors are sitting on more than one board.

Tribeca Evans says the rise in passive assets and index managers mean that committees are not used to challenge investors.

"There have been increasing opportunities for managing teams and committees that are more focused on inclusion of the index, rather than on sufficient focus or incentives for the basics of their companies. For many companies, when they are in the reference index, they end up with a shareholder register that is not so much challenge of decision and business direction. "

Short-lines point out the ultimate irony of companies that do not cooperate with them, that they are safe buyers of shares to cover their short positions. The price they pay is the only uncertain part.

But why are locally grown activists in your personality still rare?

Luciano explains this because most investors are not encouraged to do the profound research they need to be a real agitator, because indexing and up-to-date stock keeps the satisfaction of super fund investors. It's more important to stay in performance and drive action than to say it, in other words.

Luciano believes that when the super agents get caught, the tide will really turn. This happened in North America, where large pension funds supported activist investors.

"I surely believe that economic funds will appear as activists in areas where they do not see any negative repercussions on their constituency. I think it could be a real catalyst for taking corporate Australia and fostering activism through funds on a long and short side," he says .

Until then, everything is in Luciana's eyes and how successful he uses this "knock-the-go-ahead" style of activism.

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