G8’s comments suggest it first learnt of the charges against Brown on the same day police made the allegations public. This masthead has approached the company for clarification.
King also told the ASX that G8 issued its first statement to investors on July 2, “to acknowledge the shocking and extremely distressing nature of the Information”.
However, the ASX was unconvinced by G8’s assertion, saying it “does not accept that information cannot be material because it is publicly available”, and gave G8 a deadline of before 9am on Monday to provide more information justifying its reasoning, or risk its share put on a trading halt.
On Monday, G8 responded, explaining its initial approach.
“Despite being shocked and distressed by the information, GEM [G8] concluded that it was not likely to have a material impact on GEM’s [G8’s] financial position or performance and in reaching this conclusion GEM [G8] took into consideration that the charges related to conduct by a former employee at one G8 Education centre (with potentially another four impacted) out of a total of 399 centres,” King wrote.
G8 also said that while it anticipated negative publicity following Brown’s charges being made public, it didn’t expect this to affect its share price, noting that after an ABC Four Corners program in March that portrayed the for-profit childcare industry negatively and began months of scrutiny of the sector, “this negative media coverage had not materially impacted GEM’s [G8’s] share price”.
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“Ultimately GEM [G8] concluded that the information [about Brown’s charges] was not information that a reasonable person would expect to have a material effect on the price or value of its securities,” King wrote. “[G8] did not have any other information concerning it that was market sensitive.”
G8 also noted it published a statement to its own website, but not the ASX, on July 1, hours after the revelations emerged.
The childcare giant also questioned whether it was the allegations against Brown in one of its centres and revelations it had employed him for years across multiple branches, and not the “uncertainty over potential changes to the regulatory landscape and negative public sentiment towards the childcare sector generally” that had contributed to its wounded trading price.
Companies that the ASX deems to have violated its rules can have trading in their shares suspended, as well as regulatory action and potential action from aggrieved shareholders.
Since revelations emerged, a series of G8’s major investors, including Wilson Asset Management, HESTA, Australian Retirement Trust and Tanarra Capital have expressed concern to the company, such as requests for specific actions to bolster its child safety standards and employee checks. Meanwhile, shareholder advisers have also raised the prospect of clawing back some of chief executive Pejman Okhovat’s pay.
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