Tinkler's paper palace tumbles down

Like many before him, Nathan Tinkler has confused paper wealth with cash in the bank. Now he must do an about face, Holmes a Court style, to salvage what he can.

The former billionaire Nathan Tinkler looks like going the way of so many past entrepreneurs who built up paper empires in a boom but then saw their wealth decimated when the boom was over.
Usually the entrepreneurs confuse the paper wealth they have built with cash and they make cash commitments that the reduced paper wealth can no longer fund.

Over the years we have had a string of entrepreneurs who confused paper wealth with cash in the bank. They rode booms to get bigger and bigger only to come tumbling down when the boom ended. Australia’s past entrepreneurs who came into that category included Ossie O'Grady (Reid Murray), Frank Richardson (Cox Bros), Stanley Korman (Stanhill), Ken McMahon (Mineral Securities). Christopher Skase (Qintex), Robert Holmes a Court (Bell) and Alan Bond. And, of course, course there are many others.

Sometimes, but definitely not always, entrepreneurs do silly things trying to save their empires and they later face the courts. Of the list above only the late Robert Holmes a Court was smart enough to realise the boom had ended and take the necessary steps maintain a sizeable, albeit greatly reduced, fortune.

Nathan Tinkler made his money by convincing people to back him in coal mine purchases. With coal booming, he would sell the mines for huge amounts and then go onto the next deal. That technique always ends in grief when the boom ends. The coal boom has now ended. Tinkler used some of the cash that spilled out in the coal deals to spray money into rugby league (Newcastle Knights), soccer (Newcastle Jets), on racing and on due diligence for a 50 per cent stake in Ford's v8 team (which ultimately didn't lead to a deal).

Tinkler spread money around various sports. He was not as smart in sport investment as Alan Bond, who concentrated on yachting and won the America’s Cup which propelled the Bond empire.

It appears that Tinkler’s private empire is now starting to crack and he tried to sell his racing interests and some if his private family companies are running into trouble paying their debts.

And of course his last deal was the $5.2 billion – or $5.20 per share – takeover of Whitehaven, which followed the previous patterns, except that it was much larger. Tinkler did not wake up to the fact that the coal boom was over and $5.20 was far too high for a company that is now seeing declining fortunes. The shares now sell for around $3.42. Tickler as late as a couple of weeks ago was saying he could raise the money.

He has a major stake in Whitehaven, which could cause problems if the bid falls as the market expects. It is very hard for entrepreneurs who ride a boom to realise that the boom is over and they have to salvage what they can – in other words, do a Holmes a Court.

Tinkler looks like being forced to go through that stage and it will not be easy for a person who was rated by BRW as having a wealth of over $1 billion and was the top of the BRW Young Rich list. But Tinkler is young and if he can get through this crisis he will be much stronger.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles