2020 Macquarie Group board tilt

June 24, 2020

Stephen Mayne is running for the board of Macquarie Group. Here is a summary of the issues ahead of the July 30 AGM.

Macquarie released its notice of meeting for the 2020 AGM on June 24. The CV and platform is spelt out on p15 although it was slightly censored so let's start with the bits which were excluded:

Stephen currently has the time and experience to serve constructively as a non-executive director of Macquarie Group and, if elected, would bring age and geographic diversity being the youngest director and the only director not living in Sydney. Also, as the inventor (Herald Sun, 1997) of Macquarie's widely used nickname, The Millionaires Factory, Stephen feels this would add some piquancy and history to the diversity around the board table given the enormously positive impact this moniker has had on Macquarie's global ability to attract the best and brightest talent.

Stephen last ran for the board in 2015 and, whilst certainly not running as a single issue candidate, was partly motivated to nominate again this year after observing the way Macquarie and some of its ASX-listed clients treated retail shareholders in recent capital raisings. Macquarie's Equity Capital Markets (ECM) team needs to better protect the interests of retail shareholders and this cultural change can be driven home by having an advocate for retail shareholders, of which Macquarie has more than 100,000, on the board.

Stephen's other connections with Macquarie include being a former client of Macquarie Equities and he has attended numerous Macquarie AGMs, profit briefings and lunches over the past 30 years. He admires its global success in competing with the Wall Street giants, supports its long standing remuneration model as best of breed in the Australian market and wants to contribute positively to its future success as one of Australia's greatest international success stories.


As mentioned, the nomination for the board of Macquarie Group was partly triggered by its recent involvement in a range of unfair capital raisings which diluted retail shareholders. I first wrote about it in this June 9 column for The Eureka Report which included the following:

Macquarie board tilt to drive capital raising reform

The paper work has been lodged for a tilt at the Macquarie Group board at their AGM on July 30 with the most important element of the multi-pronged platform being an end to the systematic dilution of Australian retail shareholders in capital raisings.

Macquarie has been involved in a range of raisings over the past few weeks (Flight Centre, Southern Cross Media, IDP Education, Monash IVF, NAB, Oil Search etc) which have badly diluted retail shareholders as a class by including excessively large placements, unfairly capped SPPs and non-renounceable entitlement offers with no or only extremely limited ability to apply for additional shares.

Pro-rata renounceable offers that fully compensate non-participants are the fairest way to go and there hasn't been a single one of these in the Australian market so far this year, plus Macquarie has never done one themselves, as this list of all 30 PAITREO offers shows.

Even worse, Macquarie has been the market leading under-writer during this recent deluge of dilutive placements promoted by overpaid and conflicted investment banks which have advised countless boards to over-raise from institutions and under-raise from retail investors whilst sharing in about $400 million of largely unnecessary fees.

The past few weeks have been incredibly frustrating as retail investors have collectively been diluted out of more than $2 billion in value through badly structured offers from the likes of Oil Search, Flight Centre, oOH!media, Southern Cross Media, NAB and many others. A message needs to be sent to boards across the wider market that unfair treatment of retail shareholders will have consequences, including competition for their jobs.

This is a tactic that has worked in the past because boards hate contested elections and some end up saying: “we better not rip off our retail shareholders or that mad bloke might run for our board”.

There was a time when quite a few large caps were still doing placements without any sort of SPP. Santos and Ten Network Holdings both copped a board tilts after doing that and it helped stamp out the practice.

For instance, during the GFC, Westfield announced this $2.9 billion placement on February 3 2009 and had no intention of doing a follow-up SPP. An email was sent proposing a board tilt at the coming May AGM if there was no SPP and, hey presto, this SPP was announced 3 weeks later, albeit capped at just $5000 per applicant.

Similarly, QBE Insurance had been the worst ASX100 offender when it came to heavily capping and scaling back SPPs after over-sized institutional placements, so when they proposed to do it again in 2014 with an SPP capped at $160 million after a $650 million placement, I lobbed a contingent board tilt that would only be withdrawn if the SPP was expanded to at least $200 million. Hey presto, that's what they did, albeit still imposing a heavy scale back after being deluged with an undisclosed amount of applications.

NAB copped a board tilt in 2009 for refusing to lift its $750 million SPP after receiving $2.6 billion in applications and were promised a repeat contest if they stuck with their recently proposed $500 million SPP cap after its already notorious $3 billion placement. The board responded by expanding the SPP to $1.25 billion after receiving $2.9 billion in applications.

Board tilts are a blunt instrument but they generally work when it comes to changing market behaviour so we'll see what impact a Macquarie tilt will have on wider capital raising practice.

This will be the third tilt at the Macquarie board and one other part of the platform which always goes well is as follows: “having given Macquarie its nick name, The Millionaires Factory, surely that warrants a board seat given how it is has helped you attract the best and brightest across the globe.”

For some reason, the board never seems to agree with this proposition.


There was also this update in the June 23 Eureka Report column: