TLS 2.55% $3.62 telstra corporation limited.

future fund share overhang

  1. 62 Posts.
    With the Government apparently intent on the destruction of Telstra, yet still being the largest holder with 10.86% of all TLS shares via the Future Fund, and given that the FFs holding was imposed upon it to artificially prop up the T3 sell off to the public, and not by choice, then surely there is every likelihood that it will still be looking to unload further large tranches (or all) of its holding whenever the share price shows any signs of running up.

    So, should we expect a repeat of 21 August 2009, when the price had risen up to $3.65, shortly prior to the ex Div date, before the FF will suddenly and opportunistically (and with exquisite timing!) dump a further large holding and undermine the value once again.

    The overhang of the FFs holding must surely have a detrimental effect on the TLS share price, as it creates investor uncertainty and discourages investors. At the same time, a constrained price can only be beneficial to the Govt. in its negotiating position as they try to appropriate back what they want from the TLS assets to enable their grand and uncosted NBL dream.

    Effectively TLS shareholders are being subjected to a 2 pronged attack, firstly by the Govt. and Senator Conroys bullying tactics on the one hand, and secondly by pressure from potential sales of the FFs holding on the other.

    So, what is the solution? Perhaps the FF should be barred from any trading in TLS shares until after the NBL scheme is certified 100% complete and fully implemented to a defined set of parameters.

    Alternatively, perhaps the FF should be required to auction off its remaining shares through a tender process to the remaining TLS shareholders once the full and precise details of the NBL/TLS negotiations are signed off and agreed. If fair value is left with TLS, then the bid process should return a fair value to the FF, however if TLS is seriously undermined or unfairly treated, then we shareholders would no doubt bid a very low price for what was left.

    It is not difficult to anticipate what the Govt/FFs response to the above might be:

    1) The FF is totally independent of the Govt, and has its own board, and it would never ever be privy to or act upon any inside information about the Govts intentions about TLS or the NBL. Ans: Yes, and O.J. Simpson was not guilty either.

    2) It is not in the Govts interest to damage the TLS share price, since it is a 10% shareholder in the company. Ans: For every $1 of FF fund value lost, there is $9 of loss to the remaining TLS shareholders. Also, the shareholders have no offsetting benefit from the value destruction, whereas to the Govt. it is only colatteral damage which is offset by the benefits it gains in the negotiations for the NBL.

    3) The ASIC keeps a watchful eye over these things, and would take appropriate action if there was a need. Ans: They havent been doing too well lately, and in any case it would be a brave person indeed within ASIC to take on the Govt. and Future Fund. Not likely to be career enhancing.

    Final comment: Surely it is an intolerable conflict of interest for the FFs holding to overhang the market while the NBL negotiations are taking place.
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