Mulpha International Bhd, listed on the KLSE’s main board, is the biggest shareholder of Aveo – the largest retirement homes provider in Australia – which has been accused of improper practices.
The review by the corporate watchdog Asic will look at the on-market purchases of shares by Mulpha and purchases by non-executive director Jim Frayne, according to a report in the Sydney Morning Herald.
This follows the announcement of a A$145 million buyback on Monday by Mulpha and Frayne, in anticipation of shares falling over reports in newspapers about alleged unsavoury practices by Aveo, and which the company has denied.
The Aveo Group share price rebounded strongly on Tuesday and Wednesday. Aveo shares closed on the Friday before the first investigation story at A$3.05, but plunged 11.5% on Monday after the first reports exposed “exorbitant fees, complex contracts and questionable practices that put profits over the health and safety of residents”.
Since Tuesday, after the buyback was announced, Aveo’s rose 4.4% to close on Wednesday at A$2.85, according to the Sydney Morning Herald.
A spokesman for Asic was quoted by the newspaper as saying: “Asic will always examine trading, particularly directors’ trading, before, during a significant or material event or announcement.”
Under Australian companies law, directors are not allowed to trade while in receipt of inside information. However, it has yet to be established if any law has been broken.
The Sydney Morning Herald had earlier reported that a joint Fairfax Media-Four Corners investigation had uncovered a “litany of questionable business practices” at Aveo including churning of residents, fee gouging, safety issues and misleading marketing promises “made to some of the country’s most vulnerable people”.
The investigation, it said, found that many retirees did not even know what they were signing until it was too late. It documented some of the horror stories told by those affected.
But Lee told The Star yesterday that the allegations against his company had been “blown out of proportion”. He added: “We do not exploit our residents.”
The Sydney Morning Herald reported today that investment specialists were calling on Asic to investigate recent trading of Aveo’s shares.
The buyback of 9.3% of the company’s shares was launched on Tuesday.
According to the directors’ interests notices released on Tuesday, Mulpha International, purchased 414,689 shares for A$2.70 on market on June 26.
A separate notice showed Frayne purchased 10,000 shares on June 26 for A$2.79 a share, the Sydney Morning Herald reported.
It said Aveo again declined Fairfax’s request for an interview on Tuesday.
However, responding to inquiries, Aveo said that “all relevant parties are satisfied that they have complied with their legal obligations”.
Fairfax Media, the report said, was unable to make contact with Lee through Sun Hung Kai & Co in Hong Kong where he is chairman.
Frayne told Fairfax Media: “The board was briefed on, and considered, management’s proposal for a buyback after close of market on Monday 26 June. My share acquisitions occurred before then. This acquisition was in accordance with the ASX rules and Corporations Act.”
Buybacks are commonly used to reward shareholders and put a base under a company’s share price if it is falling.
Aveo was informed of the media investigation on June 2 when it was invited to appear on the programme, but declined. It was then sent a series of detailed questions on June 14. The company responded on June 21 with 19 pages of responses, according to the report.