McMillan Shakespeare falls victim to FBT change
Investors deserted the county's biggest salary packaging company after the Australian Securities Exchange denied the company's request to remain in an indefinite trading halt.
McMillan Shakespeare was placed in a trading halt last week after the Rudd government announced plans to abolish the fringe benefits tax for employer-provided cars. But as the trading halt lifted, shares in the company slumped more than 50 per cent.
McMillan Shakespeare's business model relies heavily on the near-three-decade-old fringe benefits tax regime.
The company generates millions of dollars in revenue each year - from salary packaging fees, fleet management fees, and finance trail commission - helping to run fleets of taxpayer-subsidised cars.
The company also took the unprecedented step on Wednesday of saying it would refuse to talk to analysts, shareholders or the media until the outcome of the federal election was known, saying things were too uncertain to be able to give a reasonable profit guidance.
The company - which had been a market darling for most of this year - had asked the ASX to keep its shares in a trading halt until after the election. But the ASX refused McMillan's request and the company's shares began trading again on Thursday, where they were subsequently smashed: more than half a billion dollars were wiped from its market value. The shares recovered some lost ground but closed down 42 per cent at $8.80 each.
The ASX defended its decision to allow the shares to trade again, saying interruptions to trading should be kept to a minimum.
"In the case of McMillan Shakespeare, the market is as informed as it can be ... which is not the same as there being no residual or ongoing uncertainty," ASX spokesman Matthew Gibbs said. "The company has disclosed to the market all material information of which it is 'aware'. Therefore, no proper basis remains to keep its securities suspended."
But John Abernethy from Clime Investment - which has $12 million invested in McMillan - was scathing of the government's decision, and highly critical of the ASX for not keeping the shares in a trading halt for at least another week.
Meanwhile, the bosses of three car-leasing companies are seeking a crisis meeting with Prime Minister Kevin Rudd when he visits Perth on Friday. The managing directors of Fleetcare, Fleet Network and easifleet have already announced staff layoffs, and fear the government has failed to understand the consequences of its proposed tax changes.
Fleetcare's Nigel Malcolm said the tightening of fringe benefit tax guidelines had a ripple effect throughout the industry that was almost four times greater than the cost to the driver. "This is not just about drivers of salary-packaged cars having to pay an average extra $1400 a year," he said.