FTAlphavilleFT Alphaville is a 2008 Webby Award Winner

• News
• Markets Live

We do not wish to suggest that Australia is a bandit market. But while legislators Down Under concern themselves with the evils of short selling, there seems to be another rather pernicious problem in the Oz market - short bidding.

Do you remember one Australian, Ms Suzanne Lee Forster? Her scam, lately flagged up by Henderson, apparently involves pitching low-ball bids for companies and then cleaning up when gormless shareholders accept the comical terms.

Now we’ve got another one, directed at a target rather further up the corporate food chain.
Rio Tinto on Wednesday sent a letter warning shareholders about an offer from Australian Share Purchasing Corporation Pty Ltd, a company of which a Mr David Tweed is sole director.

The gist is the same. Mr Tweed - who was previously reported to have gone after fellow miner and would-be Rio owner BHP Billiton - approaches shareholders with an offer pitched at below market value.

Rio said:

It is possible that the Australian Share Purchasing Corporation, or another company associated with Mr Tweed, will send you an unsolicited offer to purchase your Rio Tinto Limited shares. This may appear to offer you a legitimate price for your shareholding and free brokerage, but we are concerned that the ultimate outcome of these offers is that you will not receive fair value. In particular we note that on 30 April 2008 some shareholders were offered only $100 for each Rio Tinto Limited share, while the average price for those shares on the ASX during the last week of April 2008 was $142.91.

The letter then helpfully gives links and advice that may be of use in assessing any potential offers for Rio shares.

Why does this seem to be a peculiarly Australian problem? The law requires companies to provide a copy of their share register to any person who asks, under the Australian Corporation Act - which gives wannabe fraudsters a route into hapless mom and pop investors.

But given Mr Tweed’s reported previous - with similar unsolicited offers having been sent to shareholders at NIB Holdings, Insurance Australia Group, AXA Asia Pacfic, AMP and IOOF - Australia’s regulators perhaps could lighten up on the anti-short rhetoric and find a way to clamp down on a good old-fashioned scam.

Related links
Fun and games with Aussie rules - FT Alphaville, April 08
The Real Share Hustle - FT Alphaville, March 08