David Tweed - Investment Strategy

Investment Strategy

In Australia, there is a high proportion of share ownership by less sophisticated investors. This is a by-product of the demutualisation and other corporate actions in the last 20 years in Australia. Companies such as Insurance Australia Group Limited (IAG) and AMP Limited (AMP), AXA, Tower, IOOF, OFM Investments, Aevum have demutualised and in the process given shares to the former (mutual) policyholders.

Tweed set up four companies: National Exchange Pty Ltd, National Share Purchasing Corporation Pty Ltd (NSPC), Direct Share Purchasing Corporation Pty Ltd (DSPC) and Australian Share Purchasing Corporation (ASPC). By obtaining contact details through the share register of target companies, he has made several offers to purchase shares in those companies. The offers are often far below the market prices that could be realised on the Australian Stock Exchange (ASX). For instance, when AMP was trading at around $17, Tweed offered A$13.00 for the shares which subsequently fell to $5. Tweed's offers would often be in the form of a cover letter with large font detailing his offer and with an enclosed off-market transfer form that was pre-filled with the details of the target shareholder. A large number of shareholders, often elderly people who had never owned shares before, would take up the offer despite the market price clearly available in newspapers such as The Sydney Morning Herald and The Australian Financial Review.

Tweed has been accused of unethical behaviour and of taking advantage of unsophisticated shareholders. Gossip columnists Suzanne Carbone and Lawrence Money of The Age called him a "ight-fisted share-scammer", David Elias, also of The Age, called him "a man with no conscience". The Sydney Morning Herald reports that Tweed once stated that "I didn't do morals at school." He has also been described as an "..indefatigable bottom feeder" by Ian Porter and Nabila Ahmed of The Age.

In general, no law has been broken by Tweed in advancing his offers. Several shareholders who had accepted Tweed's offers annulled the contract due to technicalities in the off-market transfer process; however, the great proportion were relieved of their shares. Whenever a technicality has been identified, Tweed has amended his practices to stay one step ahead of the law, thus frustrating those that would like to shut him down. Tweed has mercilessly sued to enforce performance of agreements signed, often for minor amounts of less than $1000. These cases are usually settled in his favour and also enable the former shareholders to avoid the legal costs of mounting a defence.

To foil his schemes, several measures have been attempted. Companies have tried to close their share registers, citing National Privacy Principles (NPP) or providing them in a non-machine readable form (to make it difficult for Tweed to easily create offer letters); a court case in 2003 required that all offers that Tweed advanced would need to attach the last known market price of the shares in question. In September 2010, Tweed put out a press release stating, 'that after suing Challenger Financial Services, Challenger settled by refunding $10k of his legal costs and also provided Tweed with a new register for their frozen mortgage fund'. In September 2010, Tweed began an action against Wesfarmers for breaking the law by not providing its share register. Wesfarmers gave up at the door of the court and agreed to pay Tweed his full costs. Queensland-based LM Investments is fighting Tweed on the same basis as Wesfarmers.

In each instance, rather than retiring his scheme, Tweed has fought back. The share registers are a matter of public record, and Tweed brought action against companies that attempted to close their registers. On 13 December 2010, legislation was implemented that stopped share predators from obtaining share registers in Australia.

When required to advertise the market prices of the shares, Tweed began advancing offers to buy the shares 'in installments' so that people ignorant of the time value of money would not be able to easily evaluate whether to keep or sell their shares.

Mr Tweed has brought his share purchase activities to New Zealand. On 13 March 2007, Tweed featured on a New Zealand consumer protection programme - TARGET. The television programme revealed that he had established a company in New Zealand called "COLONIAL CAPITAL CORPORATION". Attempts to contact the company by reporters of that programme were thwarted by an absence of contact details. A search of the NZ company's office reveals that the address for service of the company is given as the office of 'Andrew James Kennedy'. Mr Kennedy is a commercial and taxation lawyer. The address of his law firm, Prudentia law, corresponds with that of the company.