OW Bunker Derided as Casino Shop by Investors

About 400 shareholders in bankrupt OW Bunker A/S met yesterday to discuss how Denmark’s second-biggest initial public offering since 2010 could go from boom to bust in just eight months.

The Danish Shareholders Association says it wants OW Bunker to become a landmark case that prompts the authorities to set new standards and ensure investors in the Nordic country never again experience a similar series of failures.

“For future IPOs it’s utterly crucial that investors sense that we live in a country governed by the rule of law, and that there will be consequences for those responsible,” Jens Moeller Nielsen, the association’s managing director, said by phone. “Investors thought they’d bought a maritime gas station, whereas in reality they bought a casino ticket.”

After an IPO that valued it at almost $1 billion, the shares soared 21 percent on their first day of trading as investors poured money into a company that in its prospectus promised a “conservative operating philosophy and corporate culture.” On Friday, the ship fuel provider declared bankruptcy after revealing risk management failures had cost it $150 million. It also said it was reporting two Singapore employees to police for alleged fraud, costing it a further $125 million.
‘Bizarre’ Statement

Arvid Andersen, who had started as defense lawyer for the two employees and now only represents one, says his client denies the allegations. OW Bunker had been familiar with the hedging practices of its Singapore unit, which he described as legal, since before the IPO, he said.

“It was part of the business model,” Andersen said by phone on Nov. 8. He declined to identify his client. Anders Nemeth, who represents the other employee, whom he identified as the former chief financial officer at OW Bunker in Singapore, characterized the company’s Friday statement as “bizarre.”

“I can certainly reject any claims that my client has done anything illegal,” he said by phone today. “We’ve yet to receive notice of any charges filed against my client and we’re not aware of any investigations by the police. If the police decide to investigate we will make ourselves available to them.”

For Denmark’s biggest private investor, PFA Pension, OW Bunker’s risk management failures are an even bigger concern than the alleged fraud. Jesper Langmack, chief investment officer at PFA, says his fund grilled OW Bunker’s management on its hedging policies before the IPO.
Police Probe

“It turns out they were gambling,” he said.

Denmark’s financial regulator can choose to investigate potentially misleading discrepancies between a company’s promises to investors and how it ultimately runs its business. If such differences do occur, the company may face police charges, according to the Financial Supervisory Authority.

If the company’s performance deviates from what it promised in its prospectus, it’s the board that’s to blame, the FSA says.

“When it comes to the actual content of a prospectus, what it actually says about risks and how they’re handled and the business case, it is the board — those who sign the prospectus — who are responsible,” Hanne Raae Larsen, director of the securities division at the FSA in Copenhagen, said in a phone interview. Larsen declined to comment specifically on OW Bunker.
Prospectus Text

The company’s prospectus painted a picture of a business that was focused on containing risks.

“As part of our integrated approach, our established risk management function controls and manages risks across our integrated business model,” OW Bunker wrote. “This has supported the successful growth of our business and creation of a diversified customer base. Our business has proven resilient to changes in macroeconomic conditions, oil and marine fuel prices and shipping rates.”

According to Nielsen at the shareholders association, “it’s very peculiar that the board did not put in place systems to ensure that they were alerted” to practices that strayed from the goals presented in the prospectus.

Soeren Johansen, partner at Altor Equity Partners and deputy chairman of OW Bunker, says the supervisory board didn’t learn of the company’s troubles until Wednesday last week. OW Bunker’s stakeholders will be best served by “having things thoroughly investigated,” he said in an interview.

Danish police said yesterday they had yet to receive any filing from the company and were planning to contact OW Bunker.

“For now we’re standing in front of a smoldering ruin where the fire has barely been put out,” Nielsen said. “It’s difficult to judge exactly what happened through the smoke.”
Source: Bloomberg