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
1 June 24
Stock plunges 15 per cent on debut
2 August 29
Announces profit of $13.4 million, missing revenue and profit targets in prospectus.
3 August 30
Shares fall 12 per cent to $1.42.
4 September 2
Issues announcement attacking “inaccurate media commentary”.
5 September 6
ASIC demands books and records
6 September 13
Deadline to deliver documents to ASIC.
Frequently Asked Questions about this Article…
ASIC has requisitioned a broad set of internal documents from iSelect as part of an inquiry into the company's compliance with continuous disclosure and fund-raising laws following a problematic ASX debut. The regulator is focused on iSelect’s August 29 announcement (when the company said it missed its revenue target) and the firm’s statements that it would meet its CY13 prospectus forecast.
ASIC’s notice asked for financial records, due diligence files, working papers, boardroom papers, letters, emails, facsimiles, file notes, diary entries, monthly management accounts, board reports and any documents about management discussions of the revenue shortfall and the reaffirmation of the CY13 forecast.
The notice was issued to ensure compliance with section 674 (continuous disclosure) and chapter 6D (prospectus requirements) of the Corporations Act. Section 674 requires listed companies to tell the market information a reasonable person would expect to have a material effect on share price, and chapter 6D requires prospectuses to disclose the information investors need to make an informed assessment.
On August 29 iSelect reported group revenue of $118 million, about 2.9% below the prospectus forecast of $121.6 million, and announced a profit of $13.4 million. CEO Matt McCann simultaneously reaffirmed an EBITDA forecast of $30 million for the year to December — a reaffirmation that ASIC has asked for supporting documents about.
iSelect shares plunged 15% on their June 24 ASX debut and have not traded above their issue price of $1.85. After the August 29 announcement shares fell a further 6% that day and dropped about 12% the following day (August 30).
iSelect listed on the ASX on June 24 after raising $215 million in its public offering, which was underwritten and promoted by banks including Credit Suisse and Baillieu Holst.
Key dates in the article: June 24 — iSelect IPO and 15% share plunge on debut; August 29 — profit announcement showing revenue below prospectus forecast; August 30 — shares fell further; September 2 — company issued a statement criticising inaccurate media commentary; September 6 — ASIC issued a notice demanding books and records; September 13 — deadline to deliver documents to ASIC.
The ASIC demand increases regulatory scrutiny and can heighten share‑price volatility and investor uncertainty while the inquiry is ongoing. Because the probe focuses on disclosure and prospectus forecasts, any findings of non‑compliance could be material to investor assessment; the Corporations Act even treats some disclosure breaches seriously, potentially as a criminal offence.
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