Death of the after market block trade?
There's a big debate brewing about whether the ASX needs to clamp down on trading halts for block trades.
There's a big debate brewing about whether the ASX needs to clamp down on trading halts for block trades.
There some outspoken investors who reckon it is an embarrassment and grossly unfair that a company's shares can be halted while one big shareholder dumps its stake. Why not stick to the practice of after-market and overnight block trades, where no halts are required?
It's an issue that has now popped up twice in the past month, including at Charter Hall on Thursday.
Both Charter Hall Group and Charter Hall Retail REIT requested halts so that major shareholder The Gandel Group could sell its $500 million stake.
The ASX accepted the trading halt requests as Gandel's broker Macquarie Securities went about finding owners for the stock. Macquarie even ran a bookbuild for the Charter Hall Group shares seeking bids in 2¢ increments from the $5 a security floor price.
Going into trading halts and launching the trade during market hours meant Macquarie, the underwriter, could get the best price for the vendor Gandel and reduce its own risk. And doing it during market hours meant fund managers were only a click or two away from their Charter Hall models, while the company itself was even out marketing to potential buyers.
Going into a halt for a selldown is by the book and passable with ASX listing rules. But should it really be that way?
Should ASX really grant a trading halt to allow Gandel - and possibly its broker - to financially benefit by running a selldown during market hours, arguably at the expense of other Charter Hall shareholders?
Surely the exchange operator's job is to keep listed companies' shares trading.
Remember brokers - and especially Macquarie - are adept at handling block trades either before or after market.
UBS, for example, got Pacific Equity Partners out of its $873 million Link Group stake in an after market trade a fortnight ago. Same at Caltex Australia last year, when Chevron waited until after market to sell its 50 per cent stake worth $4.7 billion.
So if the ASX is granting trading halts for these sorts of trades, where does it stop?
What if an institutional shareholder like Perpetual wanted to offload its 5 per cent stake in Woolworths? Could it get Woolworths to go into a halt and give Macquarie or UBS or Citi all day to find the best price?
Or if Capital Group wanted to sell its $1.47 billion stake in Amcor, should Amcor ask for a halt while Morgan Stanley and Credit Suisse found the best price?
Trading halts are great for helping companies issue new shares and quickly raise capital via accelerated bookbuilds and placements.
But to allow a shareholder to sell down? It's rare in a global context.
