Tag: Motley Fool

Former general manager at BlueScope Steel Limited (ASX: BSL) Jason Ellis has been sentenced to 8 months’ prison.

Ellis had pleaded guilty earlier this year to inciting colleagues to give false evidence to an Australian Competition and Consumer Commission (ACCC) investigation.

The competition authority was probing whether BlueScope and Ellis had been involved in cartel behaviour between 2013 and 2014, which has resulted in a separate Federal Court case.

Ellis, as BlueScope’s general manager of sales and marketing, had instructed 2 staff members to give false evidence to ACCC officials.

The false testimony involved conversations he and the colleagues had with other steel companies about fixing prices.

On the obstruction conviction, Magistrate Jennifer Atkinson this week said “a person needs to allow investigations to run properly, without any attempt to hinder”.

Conviction makes history

According to ACCC chair Rod Sims, Ellis was the first person to be charged and convicted of “inciting the obstruction of an ACCC investigation”.

“The conviction and sentence reflect the seriousness of this conduct and should send a strong message to anyone contemplating obstructing or inciting someone else to obstruct ACCC officers,” he said.

“We take any attempts to prevent the ACCC from obtaining full and truthful accounts of conduct under investigation extremely seriously and won’t hesitate to prosecute any similar cases in the future.”

After handing down the jail sentence, Atkinson released Ellis upon entering into a recognizance conditional on 2 years of good behaviour. She also ordered Ellis to pay a penalty of $10,000.

The conviction was liable to a maximum sentence of 2 years’ jail. A guilty plea in the local court, which Ellis took, carries a maximum of 1 year imprisonment.

The Motley Fool contacted BlueScope for comment but had not heard back at the time of writing.

Sims said Ellis’ efforts to stop the investigation didn’t deter his team.

“Not only did we continue our investigation and take legal action against BlueScope and Mr Ellis for alleged cartel behaviour… we also referred the obstruction conduct to the [Commonwealth Director of Public Prosecutions] to consider prosecuting Mr Ellis.”

BlueScope’s share price was up 2.55%, trading at $17.28 at 3.15pm AEDT. It has been on a spectacular rally recently, rising 26% since the start of October.

More reading

• Meet the latest ASX stock to come under the takeover spotlight
• Wilson Asset Management thinks these 2 ASX shares are a buy
• Why BlueScope, Home Consortium, IAG, & Kogan shares are dropping lower
• BlueScope (ASX:BSL) share price on watch as takeover rumours swirl
• Why ALS, BlueScope, FlexiGroup, & Perpetual shares are charging higher

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. 

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The National Australia Bank Ltd (ASX: NAB) share price was a positive performer on Wednesday.

The banking giant’s shares rose 1% to end the day at $23.61.

Why did the NAB share price push higher?

The big four banks were all on form on Wednesday and helped drive the S&P/ASX 200 Index (ASX: XJO) higher.

This appears to have been down to improving investor sentiment following news that another COVID-19 vaccine was likely to be given emergency use approval in the United States this week.

In addition to this, an announcement out of NAB appears to have also given its shares a boost this afternoon.

What did NAB announce?

NAB has announced that it has entered into an agreement to sell its New Zealand life insurance business, BNZ Life, to leading New Zealand life insurance provider Partners Life.

According to the release, the two companies have agreed a fee of NZ$290 million for the business.

Management notes that the asset sale is consistent with its strategy to focus on its core banking businesses across Australia and New Zealand.

BNZ’s CEO, Angela Mentis, commented: “Ensuring BNZ customers continue to access insurance remains important to us. We’re confident that this sale will provide the best outcome for our insurance customers and that they will continue to receive a high standard of customer service from a New Zealand insurance provider with a strong local reputation.”

What now?

NAB has advised that it expects the sale to complete in late 2021. Though, it remains subject to regulatory and other approvals.

Upon completion, the sale of BNZ Life is expected to result in an increase in NAB’s Common Equity Tier 1 (CET1) ratio by 6 basis points. This is based on the bank’s risk weighted assets as of 30 September 2020.

As part of the sale, BNZ will also enter into an exclusive 10-year agreement for the referral of BNZ’s customers with life insurance needs to Partners Life. This remains subject to Partners Life continuing to meet agreed operating standards.

More reading

• The Commonwealth Bank (ASX:CBA) share price is climbing higher today. Here’s why.
• Why the Bendigo and Adelaide Bank (ASX:BEN) share price is jumping higher today
• The ASX bank with the best dividend yield under APRA’s new guidelines
• Here’s how ASX 200 bank shares have performed in 2020 so far
• Why ASX banks are licking their lips right now

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Australian fashion jewellery company Lovisa Holdings Ltd (ASX: LOV) could be the next H&M or Zara, according to L1 Capital co-founder and chief investment officer, Mark Landau.

The fund manager believes Lovisa’s recent acquisition of Beeline in Europe will generate a strong return on investment for the company over the next 1 to 2 years. 

The Lovisa share price is currently trading 4.73% higher at $11.29, amid a broader rise in retail shares on the ASX today.

One of the “most exciting” Australian retail shares

Describing Lovisa as “one of the most exciting retail stocks in Australia”, Landau says the Beeline acquisition will become the foundation of its future growth.

“Lovisa has established itself as a truly global, high growth, fast-fashion business selling affordable jewellery to fashion-conscious young females,” he said.

Landau believes this low-cost growth move will be earnings accretive in the short term, saying the buyout of Beeline was “for basically nothing”. 

The total consideration for Beeline was a mere 60 Euros (A$96.6) – yes 60 Euros, not 60 million – allowing Lovisa to accelerate its store rollout in a low cost manner across Europe.

With such a low acquisition cost and modest capex requirements going forward, Landau thinks the transaction will generate a strong return on investment over the next 1 to 2 years.

In the medium term, Landau believes Lovisa has the potential to become a major global fashion brand, “like H&M or Zara”. This due to its strong customer loyalty, attractive margins, high returns on capital and a relatively weak set of competitors.

More on Lovisa’s Beeline acquisition

The acquisition of the European retail store network of German wholesaler Beeline GmbH, for just 60 Euros will see Lovisa’s retail store count jump by a quarter.

It is expected to add more than 80 stores to the Lovisa global store network across seven European countries.

The Beeline Group operates 114 fashion jewellery and accessories stores across Germany, Switzerland, the Netherlands, Belgium, Austria, Luxembourg, and France, under the brands Six and I Am.

Lovisa’s largest markets meanwhile are Australia, where it operates approximately 152 stores, and South Africa, with 62 stores.

About the Lovisa share price in 2020 

The Lovisa share price has lost about 6% in value this year. It started the year at $12, before plunging to $2.34 at the height of the pandemic in March – its 52-week lows.

The company commands a market cap of $1.15 billion.

More reading

• Why CSL, Lovisa, Lynas, & Syrah shares are dropping lower

Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The REA Group Limited (ASX: REA) share price has continued its positive run on Wednesday.

In fact, at one stage the property listings company’s shares were up almost 3% to a new record high of $149.47.

When the REA Group share price reached that level, it meant it was up an impressive 42% since the start of the year.

Why is the REA Group share price at a record high?

There have been a couple of catalysts for the outperformance of the REA Group share price in 2020.

One of those was the company’s solid performance during the pandemic. Despite the disruption caused by COVID-19, REA Group delivered a relatively robust FY 2020 result and has built on this in FY 2021.

For example, in FY 2020, REA Group experienced a sizeable 12% reduction in national listings. However, it only reported a 6% decline in revenue to $820.3 million and a 5% decline in earnings before interest, tax, depreciation and amortisation (EBITDA) to $492.1 million.

Pleasingly, national residential listings recovered to almost pre-COVID levels during the first quarter of FY 2021 and were down just 2% on the prior corresponding period.

This improvement, combined with a meaningful reduction in its cost base, led to REA Group delivering an 8% increase in first quarter EBITDA compared to the corresponding period to $123.8 million.

And with listing volumes improving further early in the second quarter and many experts tipping a strong rise in house prices next year, things are looking positive for REA Group in FY 2021.

Bullish brokers.

Another catalyst for the strong performance of the REA Group share price was a recent broker note out of Morgan Stanley.

Its analysts believe the company is well-placed for growth due to improving property listing volumes, larger than normal price increases next year, and its flat costs

This led to Morgan Stanley putting an overweight rating and $150.00 price target on its shares last month.

However, with the REA Group share price now trading within touching distance of this price target, the potential upside from here could be limited.

More reading

• 3 ASX growth shares to add to your portfolio in 2021
• 2 outstanding blue chip ASX shares to buy in 2021
• 10 fantastic ASX shares to buy in December
• The REA Group (ASX:REA) share price is up 33% in 2020
• 2 ASX shares making all-time highs today

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended REA Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Following an enormous run-up in Amazon.com Inc‘s (NASDAQ: AMZN) stock price during the first seven months of the year, shares have failed to gain any meaningful momentum since then. The stock is currently at the same level it was on 1 August 2020. Does the stock’s underwhelming performance in recent months give investors a buying opportunity as we head into a year that may benefit from a reaccelerating U.S. economy as vaccines potentially begin suppressing COVID-19?

To answer this question, let’s take a look at Amazon’s business momentum and the growth stock’s valuation.

Soaring sales and improved profits

2020 has undoubtedly been a spectacular year for Amazon. After wrapping up 2019 with 20% year-over-year sales growth, no one would have guessed the acceleration that would be in store for the company in 2020. First, second, and third-quarter revenue jumped 26%, 40%, and 37% year over year. Coronavirus-related lockdowns meant consumers all over the world flocked to the e-commerce company’s website to order goods without having to leave their homes.

Importantly, however, the boost these lockdowns provided Amazon benefitted more than the e-commerce giant’s top line. Trailing-12-month free cash flow for the period ending 30 September was $29.5 billion, up from $23.5 billion in the same period one year earlier. This occurred even as operating expenses surged as Amazon hired aggressively and incurred increased costs related to operating during a pandemic. Operating expenses for the nine-month period ending 30 September were $244 billion, up from $182 billion in the same period one year earlier.

Capturing how Amazon was able to demonstrate a scalable business even as expenses jumped, the company’s trailing-12-month operating margin was 5.7% at the end of Q3. That compares to 5.4% at the end of the year-ago period.

Handling the coronavirus pandemic in stride, it’s not surprising that the stock is up a total of 70% this year.

What about Amazon stock’s valuation?

But has Amazon stock’s big move higher during the first seven months of the year already priced in the company’s strong potential over the long haul? Even more, are investors fully considering the risks of a possible significant deceleration in the company’s top-line growth as the economy reopens and consumers resume some of their brick-and-mortar shopping habits?

Amazon stock certainly doesn’t appear cheap at first glance. The company has a $1.6 trillion market capitalisation and trades at 92 times earnings. But here’s what investors should keep in mind: analysts are convinced that there’s still significant room for earnings-per-share (EPS) growth as strong revenue growth continues and the company’s operating margin expands further. For instance, consider that analysts are currently modeling for Amazon to achieve earnings per share of approximately $63 in 2021 — up from an estimated $39 in 2020 and about $23 in 2019. With revenue growing rapidly and Amazon’s operating margin expanding, earnings could soar in the coming years.

Amazon stock: buy, sell, or hold?

So, is Amazon stock too expensive to buy? Not necessarily. Earnings per share growth like this suggests shares may be worth their current price tag.

Investors should still exercise caution when it comes to Amazon stock. 2020 was an unprecedented year in many ways. It’s possible that in 2021 the e-commerce specialist has a tough time living up to strong year-ago revenue comparisons (thanks to lockdowns that boosted sales in 2020). Currently, analysts are modeling for 18% sales growth in 2021. If analysts are overly optimistic, however, the market could punish the stock. 

Despite this near-term risk, the company’s strong business momentum and the impressive scalability its business model demonstrated in 2020 ultimately make the stock a buy at this level, in my opinion. For investors interested in buying the stock, it would be wise to keep the position small relative to the total value of their overall portfolio in order to help diversify away from some of the risks of any unforeseen challenges.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

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• Amazon’s driverless electric vehicle is coming
• Shopify stock’s 166% rally in 2020 isn’t sustainable
• Better buy: Amazon vs. GameStop
• Is the share market starting to look like it did in 1999?

Daniel Sparks has no position in any of the stocks mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool Australia has recommended Amazon. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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The Emerge Gaming Ltd (ASX: EM1) share price is rocketing today, up 19.4% at the time of writing to 8 cents. Emerge Gaming shares closed at just 6.7 cents yesterday, but opened at 7 cents today after a brief trading halt (more on that later), and climbed even higher afterwards, hitting 8.6 cents a share at one point.

Today’s move caps off what has been a wild few months for Emerge Gaming shares. As recently as May 2020, the company’s shares were trading for just 1 cent apiece. However, the shares spiked back in October, climbing as high as 19 cents, representing a year-to-date gain of 600% and a 1,300% gain since 25 May. On today’s prices, Emerge shares are still up 305% year to date, but also down more than 42% from October’s highs.

So what is Emerge Gaming? And why are the company’s shares going ballistic today?

What does the company do?

Emerge Gaming is a company placing itself in the middle of the eSports market. eSports refers to the ‘sport’ of competitively playing video games. Emerge claims this market is projected to grow to US$1.48 billion in terms of revenue this year.

According to Emerge, it is “changing the eSports gaming landscape” with its flagship ‘Arcade X’ platform for eSports tournaments.

Arcade X reportedly offers players a “unique and mature gaming experience” through a “hybrid environment” which offers access to both casual and eSport gaming. Emerge states that “with top of the line technological integrations and explored user experiences, it [Arcade X] is without a doubt going to change the way the corporate world and gaming world engage in the future”. This platform has apparently been in operation for two years, and has close to 40,000 registered users from around the world.

Emerge also offers a gaming and mobile platform called ‘Cloudzen’ as an “entertainment platform as a service”. Cloudzen offers “various means of communication channels” through game stores, gaming communities and social networking.

However, the company has been in the news for the wrong reasons of late. Just last week, Emerge shares crashed 50% on news that one of the company’s platforms – ‘Miggster’ – had managed to sign up just 25,764 subscribers after attracting more than 6 million ‘pre-registrations‘.

Why is the Emerge share price rocketing today?

Today’s massive spike in the Emerge share price appears related to an ASX announcement the company released just after market open this morning. In this announcement, Emerge told investors a platform called ‘MTN Arena’ has registered 80,000 new subscribers in South Africa since its launch back in July of this year. MTN Arena is owned by the MTN Group, a public company listed on the Johannesburg Stock Exchange. However, it is operated by Emerge Gaming software.

Emerge and MTN inked an agreement to “distribute, market and operate Emerge’s platform technology under the brand “MTN Arena” in South Africa” back in June.

These MTN Arena subscribers are monetised as well, with the use of MTN Arena apparently costing subscribers 3 South African rand (or roughly 26 cents) a day (or $7.80 a month). Emerge reportedly earns 40% of the “net revenue” of this arrangement.

Further, Emerge told investors the two companies are continuing to aggressively market MTN Arena to the “circa 29 million MTN subscribers in South Africa”. This is being executed through paid media campaigns, specifically:

…targeted digital campaigns across multiple digital channels and bulk SMS… These campaigns target the middle to low-income mass market promoting tournaments, competitions and prizes through key messaging, video and other digital content in the distribution channels.

It appears investors like what they hear with this update, judging by the performance of the Emerge share price today.

More reading

• Why Emerge Gaming, Flight Centre, Medical Dev International, & Tyro shares are dropping lower
• The Emerge Gaming (ASX:EM1) share price is on a rollercoaster ride today
• Why Abacus, Emerge Gaming, Jumbo, & Woodside shares are dropping lower
• Why the Emerge Gaming (ASX:EM1) share price crashed 50% lower today

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Of ASX cannabis shares, Creso Pharma Ltd (ASX: CPH) shares have taken the spotlight recently after running more than 300% this month. Today, however, at the time of writing, the Creso share price has fallen 4.17% to 23 cents. This comes despite the company announcing that its subsidiary, Mernova, has secured a supply agreement with the Ontario Cannabis Retail Corp. 

Historic milestones for cannabis this month 

In addition to the surging Creso share price, other ASX cannabis shares have also delivered better than double digit returns following historic legal milestones for the consumption of cannabis this month. Earlier in December, the United Nations Commission on Narcotic Drugs (CND) voted to accept the World Health Organisation’s (WHO) recommendation to reschedule cannabis.

The passage came under the WHO recommendation, which recognised the medical value of cannabis, and will see the product removed from Schedule IV of the 1961 Convention. Schedule IV is reserved for substances with “particularly dangerous properties” and little or no therapeutic value. The vote acknowledges the medicinal usefulness of cannabis and clarifies that CBD is not under international drug control. 

This also follows the landmark ruling from the European Union’s highest court, the Court of Justice of the European Union. It ruled that cannabidiol is not a narcotic as it does not appear to have any psychotropic effect or harmful effect on human health. 

Creso share price falls despite new agreement

The Creso share price is dropping lower today despite the company announcing its wholly owned subsidiary, Mernova, has secured the Ontario Cannabis Retail (OCR) Corporation supply agreement. Ontario is Canada’s largest recreational cannabis market and the region’s monthly revenues from cannabis sales during September 2020 were C$77.9 million. This represents over 30% of Canada’s total monthly sales volume of cannabis. 

Under the agreement, Mernova will supply OCR with a range of its high quality, artisanal cannabis strains HPG13, Lemon Haze and Minosa. Its products will be sold through established stores and through the OCR online sales platform. 

Mernova Managing Director Jack Yu had this to say of the agreement:

This is a huge step forward towards selling our high quality products in Canada’s largest market. To be able to compete in a market with over C$385m in sales between April 2019 and March 2020, which continues to grow, as evidenced by over $80m in sales this past September alone, is a huge opportunity for us and we look forward to firmly establishing ourselves as one of the premier cannabis producers in the country.

More reading

• Creso Pharma and Nuix were among the most traded shares on the ASX last week
• ASX pot stocks have been skyrocketing in December
• Why the Creso Pharma (ASX:CPH) share price crashed 33% lower today
• Why the Creso Pharma (ASX:CPH) share price is rocketing 96% higher today
• Why Afterpay, Creso Pharma, Healius, & Resonance Health shares are storming higher

Motley Fool contributor Lina Lim has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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This week a large number of dividend favourites announced their interim distribution guidance for FY 2021.

Here’s a summary of what income investors can expect from these ASX shares:

APA Group (ASX: APA)

This energy infrastructure company revealed that it expects to pay shareholders an interim distribution of 24 cents per share for the six months ending 31 December 2020. This represents a 4.3% increase over FY 2020’s interim distribution. It will be paid to shareholders on 17 March 2021.

Aventus Group (ASX: AVN)

Retail park operator Aventus announced a quarterly distribution of 4.2 cents per share for the December quarter. This is 5% higher than the previous quarter and brings its first half distribution to 8.2 cents per share. Shareholders will be paid this distribution on 24 February.

BWP Trust (ASX: BWP)

This Bunnings Warehouse landlord expects to pay shareholders an interim distribution of 9.02 cents per share on 26 February. This is flat on last year’s interim distribution. Annualised, this equates to a 4.1% distribution yield.

Centuria Capital Group (ASX: CNI)

Commercial property fund Centuria Capital intends to pay an interim distribution totalling 4.5 cents per share for the year ending 31 December 2020. This is in line with its recently upgraded distribution guidance of 9 cents per share for the full year. This represents a forward 3.7% yield.

Mirvac Group (ASX: MGR)

This property company announced that it will pay shareholders a 4.8 cents per share distribution for the first half. This is down 21% on the prior corresponding period. Shareholders will be paid the distribution on 1 March.

National Storage REIT (ASX: NSR)

Leading self-storage operator National Storage announced plans to pay a 4 cents per share interim distribution to shareholders on 1 March. This is down from a 4.7 cents per share distribution a year earlier.

Vicinity Centres (ASX: VCX)

Finally, this shopping centre operator plans to pay shareholders an interim distribution of 3.4 cents per share for the six months ending 31 December 2020. This is a 55% reduction on the same period last year. COVID-19 has weighed heavily on its bottom line and ultimately its distributions.

More reading

• 3 ASX shares that keep growing their dividends every year
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• Quarterly rebalance: Afterpay (ASX:APT) added to ASX 20, Kogan (ASX:KGN) joins the ASX 200

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of APA Group. The Motley Fool Australia has recommended AVENTUS RE UNIT. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Following October’s budget announcement, the mid-year economic and fiscal outlook (MYEFO) is scheduled to take place this Thursday (17 December 2020).

The outlook will be delivered by Treasurer Josh Frydenberg. During his commentary, Mr Frydenberg will discuss what the economy has done since October, the current state of affairs, and what parliament predicts to be on the horizon.

Considering the way that economies worldwide continue to navigate the global coronavirus pandemic, this year’s MYEFO discussions might be more interesting to listen to than last year’s were.

So what’s been going on?

As the MYEFO approaches, the Australian Financial Review (AFR) reports economists are widely expecting an improvement of $14 billion or more in the budget’s bottom line.

Their speculation is commonly based off of recent gains in the price of iron ore, which significantly exceeded Treasury’s previous estimates. This is a particularly welcomed benefit to receive, considering the current trade war with China.

Following the spike in unemployment experienced earlier this year, positive job data was released by the Australian Bureau of Statistics on 15 December. The slight increase in the payroll jobs number supports other recently published, positive economic indicators like an increase in consumer confidence. These combined factors often lead to an economy on the up. Mr Frydenberg’s insights tomorrow should help connect the dots.

Finance or philosophy?

While economic analysis and predictions add colour to underlying business environments, everyone’s takeaways are bound to vary. From a share market perspective, volatility can be expected regardless of government statements or statistics.

That said, if you’re someone interested in big-picture perspectives, you might enjoy hearing about what comes out of the MYEFO tomorrow.

Tuning in to Mr Frydenberg’s comments will shed light on how Australia continues to manage China’s backlash and steer through the pandemic. It will provide updated economic forecasts and share the government’s insight on what recovery looks like moving forward.

If this makes your ears perk up, tune in! If not, rely on your reporter friends to disperse the best bits.

More reading

• Why the Codan (ASX:CDA) share price is surging 5% higher today
• ASX 200 up 1.1%: ANZ AGM, Resolute jumps, travel shares soar
• The Commonwealth Bank (ASX:CBA) share price is climbing higher today. Here’s why.
• The ASX bank with the best dividend yield under APRA’s new guidelines
• Why the Beacon Lighting (ASX:BLX) share price is on watch today

Motley Fool contributor Gretchen Kennedy has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The corporate regulator has slammed airline Regional Express Holdings Ltd (ASX: REX) for “continuous disclosure failures” to shareholders and the ASX.

The Australian Securities and Investments Commission (ASIC) on Wednesday slapped a one-year ban on the company from issuing reduced-content prospectuses to raise money on the ASX.

Regional Express must now produce a full prospectus to ask investors for further cash.

The corporate regulator didn’t mince words in explaining the prohibition.

“ASIC’s decision was based on REX’s failure to disclose to the market that it was considering the feasibility of commencing domestic operations, such as flying to capital cities, in addition to its regional operations,” stated the commission.

“This information was first released publicly to a journalist on 11 May 2020.”

What did Rex do exactly?

The incident refers to Rex deputy chair John Sharp’s interview with the Australian Financial Review, where he revealed a new $200 million plan to start flying between Sydney, Melbourne and Brisbane.

Up until then, Regional Express had flown between regional and rural destinations and never directly competed with the likes of Qantas Airways Limited (ASX: QAN) and Virgin Australia.

After the publication of that article, Regional Express was forced to place a trading halt on its shares. The next day it made an official announcement to the ASX revealing the $200 million initiative.

The Motley Fool has requested comment from Regional Express.

ASIC stated that the use of a reduced-disclosure prospectus was “a privilege” conditional on legal compliance, including meeting market disclosure responsibilities.

Ironically the reprimand failed to dampen investor enthusiasm for Rex shares. 

The Rex share price was up 9.14% at 2.30pm AEDT on Wednesday, in response to the company’s receipt of a High Capacity Air Operator’s Certificate from the Civil Aviation Safety Authority.

This means the airline is another step closer to competing in the lucrative capital city routes, which it plans to do from 1 March.

More reading

• Why Beacon Lighting, Flight Centre, REX, & Resolute Mining are shooting higher
• Why the Regional Express (ASX:REX) share price is soaring 10% higher today
• Qantas (ASX:QAN) budget flights to exceed pre-COVID levels by March
• Why the Regional Express (ASX:REX) share price is flying higher today
• Regional Express (ASX:REX) share price soars to 13-year high

Motley Fool contributor Tony Yoo owns shares of Qantas Airways Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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