ASIC demands company files in probe of iSelect float flop
Australian Securities and Investments Commission investigators have requisitioned the documents, including financial records, emails and meeting minutes, as part of an inquiry into the company's compliance with continuous disclosure and fund-raising laws.
An ASIC notice, obtained by BusinessDay, required iSelect to hand over all its records relating to a profit announcement on August 29 in which the company admitted it had missed its revenue target.
The regulator also called for documents relating to iSelect's announcement on the same date that it expected to meet the earnings forecast for the 2013 calendar year contained in its prospectus. iSelect was told to deliver the documents to ASIC's Melbourne office by 1pm last Friday.
Founded in 2000 by Damien Waller and David Urpani, iSelect listed on the ASX on June 24 after raising $215 million in a heavily promoted public offering backed by Credit Suisse and Baillieu Holst.
Despite being pitched as a float that would "shoot the lights out", iSelect shares dived 15 per cent on debut and have not since traded above their issue price of $1.85.
In its notice, dated September 6, ASIC told iSelect to produce all documents relating to the August 29 announcement, including "due diligence files, working papers, boardroom papers, letters, emails, facsimiles, file notes or diary entries". ASIC also demanded iSelect's monthly management accounts and board reports, together with any documents relating to management discussions of the company's revenue shortfall.
iSelect's August 29 announcement revealed group revenue of $118 million, 2.9 per cent below the prospectus forecast of $121.6 million.
At the same time, chief executive Matt McCann reaffirmed iSelect's forecast that earnings before interest, tax, depreciation and amortisation for the year to the end of December would total $30 million.
However, ASIC has demanded documents "which record or relate to the ... reaffirmation that CY13 forecast would be met, all discussions relating to that reaffirmation and the current version of the CY13 forecast that support the reaffirmation, and all changes made to the component items in the current version of the forecast as against the version used for the prospectus".
iSelect's share price fell 6 per cent on August 29 and another 12 per cent the next day.
ASIC's notice was issued "in relation to ensuring compliance with the requirements of section 674 and chapter 6D of the Corporations Act".
Section 674 requires listed companies to tell the market of "information that a reasonable person would expect, if it were generally available, to have a material effect" on its share price. Contravening the section can be a criminal offence.
Chapter 6D covers prospectuses and includes a requirement to disclose "all the information that investors and their professional advisers would reasonably require to make an informed assessment" of matters including the firm's financial performance.
Market mayhem
June 24 Stock plunges 15 per cent on debut
August 29 Announces profit of $13.4 million, missing revenue and profit targets in prospectus.
August 30 Shares fall 12 per cent to $1.42.
September 2 Issues announcement attacking “inaccurate media commentary”.
September 6 ASIC demands books and records
September 13 Deadline to deliver documents to ASIC.
Frequently Asked Questions about this Article…
ASIC has launched an inquiry into iSelect’s compliance with continuous disclosure and fund‑raising laws after the company’s profit announcement on August 29 revealed it had missed revenue targets. The regulator has requisitioned internal records to examine whether iSelect properly disclosed information that could affect its share price.
ASIC’s notice required a broad set of records, including financial records, due diligence files, working papers, boardroom papers, monthly management accounts and board reports, emails, letters, facsimiles, file notes, diary entries and any documents about management discussions of the revenue shortfall and the reaffirmation of the CY13 forecast.
The trigger was iSelect’s August 29 announcement that group revenue was $118 million—2.9% below the prospectus forecast of $121.6 million—and the company’s simultaneous reaffirmation that it expected to meet the CY13 earnings forecast. ASIC wants records that relate to that reaffirmation and any changes to the forecast components used in the prospectus.
The article reports group revenue of $118 million (2.9% below the prospectus $121.6 million), a profit announcement of $13.4 million, and a management‑stated forecast of EBITDA of $30 million for the year ending December (CY13). The company raised $215 million when it listed on the ASX.
iSelect shares plunged 15% on their June 24 ASX debut and have not traded above the $1.85 issue price since. After the August 29 announcement shares fell a further 6% on that day and about 12% the next day, dipping to around $1.42.
ASIC’s notice cites section 674 and chapter 6D of the Corporations Act. Section 674 requires listed companies to disclose information that a reasonable person would expect to have a material effect on share price, while chapter 6D governs prospectus disclosure and requires providing all information investors and their advisers would reasonably need to make an informed assessment.
Key dates: iSelect listed on June 24 after raising $215 million; August 29 the company announced a $13.4m profit and missed revenue targets; August 30 shares fell further; September 2 iSelect issued a statement criticising media commentary; ASIC issued a notice dated September 6 demanding documents, with a deadline mentioned in the article for delivery to ASIC (a Sept 13 deadline is also noted).
Regulatory scrutiny can increase uncertainty around a company’s outlook and share price. For everyday investors, the inquiry highlights the importance of monitoring official ASIC findings and iSelect’s disclosures—because potential breaches of continuous disclosure or prospectus rules can materially affect investor confidence and stock performance.
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