Downer’s shares jump on false figures

14 May 2014

Market Forces, represented by lawyers at Environmental Justice Australia, has submitted a complaint to the Australian Stock Exchange (ASX) in response to an allegedly misleading disclosure published by Downer EDI in December last year.

Downer had announced to the stock market that Adani had chosen them to construct and operate its Carmichael mine and related infrastructure. Market disclosures are important as they guide investors, giving them information to make decisions about how whether they want to remain with the company, and how much they expect it to be worth. Needless to say, accuracy in disclosures is critical.

Downer’s disclosure quoted Adani Australia Country Head and CEO Jeyakumar Janakaraj, who claimed that the projects would “deliver vital export opportunities for Queensland, 10,000 jobs [and] $22 billion in taxes and royalties.”

However, in a submission to the Queensland Land Court – where conservation group Coast and Country is contesting the Queensland government’s approval of the Carmichael mine – Adani’s own witness, mining economist Dr Jerome Fahrer, calculated that the mine and rail will only generate 1464 jobs, and the project’s worth in royalties is $7.8 billion.

The massive disparity between the company figures and expert calculations is staggering, and suggests that the economic value of the mine was grossly and deliberately overstated.

The Carmichael project’s economic viability was further debunked by more expert analysis in the court hearing, as Tim Buckley of the Institute for Energy Economics and Financial Analysis (IEEFA) testified that the mine was unlikely to even turn a profit. Even in the best case scenario for providing taxes and royalties, Adani’s figures seem to be overestimated by billions of dollars.

Following Downer’s ASX disclosure containing this discredited information, the company’s stocks experienced their greatest single day price rise in six months – rising 7.1% from 4.24 at market close on the day before the announcement (18 December) to 4.54 at market close the following day. Downer EDI’s share price continued to rise over the ensuing ten days, hitting a six-month high of 4.8 on 29 December.

As Market Forces’ complaint contends, “a reasonable person would expect the inaccurate information quoted in the Downer announcement would have had an impact on Downer’s share price.” This certainly seems to be the case given Downer’s remarkable stock market performance following the announcement.

We’re asking the ASX to take action that forces Downer to either make a corrective or update announcement to the stock exchange, alerting existing and prospective investors to the accurate information.

See Lucy Cormack and Lisa Cox’s coverage of this storage in the Sydney Morning Herald, and click here to read the letter of complaint in full.

Is your super financing the Carmichael mega coal mine?

Speaking of investors in Downer, there’s every chance that through your superannuation fund, you’re one of them. As an ASX 200 company, all but a few of Australia’s super funds will be invested in Downer on your behalf. So not only are your retirement savings at risk by Downer providing false information to the market, but you are also personally invested in what would be Australia’s biggest coal mine.

If your money is with a super fund invested in Downer, you are literally invested in the company that is building the mine that would open up the Galilee Basin and lead to massive industrialisation in the Reef and hundreds of millions of tonnes more carbon dioxide added to the atmosphere.

Take action today: tell your super fund to tell Downer: get out of Adani’s Carmichael mega coal mine! Click this link or the image to take action.

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