Small and medium cap fallout from Opes collapse

Clothing retailer Austin Group could be the first of several small and medium cap companies to be affected by problems affecting the Opes Prime stockbrocking group.

On Thursday receivers and managers were appointed to Opes Prime Stockbroking and three subsidiaries, and on Friday ASX revoked its trading status. The Australian Securities and Investment Commission also announced it was investigating Opes Prime for possible breaches of the Corporations Act.

Because of the nature of Opes’ operations and its margin lending to clients, the companies key secured creditors – ANZ Bank and Merrill Lynch – are now positioned to sell hundreds of millions worth of shares used as collateral for the margin loans they financed.

That has triggered speculation about which companies could be affected by any share sell-off. On Thursday Austin Group suspended trading in its shares, and while it has not given a reason for doing so up to 45% of its shares are reportedly held by Opes.

Admiralty Resources and Hedley Leisure also announced trading halts on Friday.

Other companies rumoured to be affected include some whose shares may have been held by Hawkswood, an investment company of Opes’ founders that has also been put into receivership.

Hawkswood’s website list investments in: Global Designer Brands, Energy Response Holdings, and Intrinsic Investment Management, according to the Australian Financial Review.

The paper also reports that high profile investor and criminal barrister Chris Murphy is exposed to Opes’ problems through margin lending and holds shares in businesses such as Challenger Financial Services and Australian Pharmaceutical Industries.

Other businesses with shares rumoured to be held through Opes include Just Group – today announced as subject to a takeover bid from Solomon Lew led company Premier Investments – ABC Learning Centres and Clive Peeters.

At 10.45 am Just Group was up 0.6% on its Friday’s closing price to $3.54, while there has been no movement in Clive Peeters’ shares.

Alan Kohler reports an ANZ Bank spokesman says the bank will not be selling shares at massive discounts.

More broadly the market has been volatile this morning, recovering from a 0.5% dip in the first 10 minutes of trading to rise back above its opening level and then fall again. At 12.05 it is trading at 5399.0, down 0.4% on Friday’s close.