Saturday, 13 July 2013

The MIR scam continues

In June 2013 MIR had a reported NTA of $1.92 and a share price ramped to $2.50. MIR's criminal associates had ramped the company's share price to 30% above its asset backing while ASIC watched impotently. According to ASIC, MIR traded at $2.50 not because of manipulation by entities that stood to gain from issuing shares and booking unrealized profits, but rather due to entirely natural market movements, one of those ubiquitous harmless oddities and not fraud. ASIC gave its guarantee that $2.50 was a market price and not a blatantly manipulated price, and should therefore reimburse granny investors when this scheme and similar ones blow up.

According to its latest annual report, in the 2013 financial year MIR collected $10m from its investments in dividends and interest, with management burning $2m (20%), for a net operating profit of $8m on its net assets of $265m. MIR then declared dividends of $21m to lure new victims. To pay out dividends in excess of its operating income year after year, MIR must either sell assets or issue shares. Since no LIC ever wants to sell assets, preferring unrealized profit to actual profit and an expanding feeding trough to a contracting one, dividends are financed by capital raisings. Over the last decade MIR has issued 50m shares, increasing shares outstanding by 50%.

MIR's share price is ramped by the same criminals running the AFI and DJW scams. With a June reported NTA of around $1.92, given costs averaging 20% of operating income, the fair value of MIR was $1.54, disregarding the accounting fraud in MIR's books. MIR was ramped to $2.50, a much more profitable price at which to issue shares, scam granny investors and book unrealized profits for AFI and DJW. MIR can then claim successful long term performance based on this grossly fraudulently 'market' price, which together with the ponzi dividends can be used to lure new victims.

Additionally, MIR's reported NTA of $1.92 is overstated and its annual report fraudulent. MIR doublecounts dividends receivable that are already incorporated in NTA, while not making allowance for its announced dividends payable, in a perverse inversion of the conservatism accounting principle. MIR deceptively measures performance and valuation assuming a world with no fees or taxes. Moreover, several of the shares owned by MIR, such as BKW and LSX, are ramped and cannot actually be sold at book value.

ASIC refuses to admit ramping even exists, and has not once intervened against ramping fraud, allowing criminals such as MIR to freely inflate investments sold to granny investors at purported market prices. At most, ASIC's response to such fraud involves more disclosure. But if the fraud is of a kind where the connect between disclosure and asset price has been deliberately broken, what good does more disclosure do? In terms of results, nothing. In terms of results, ASIC is a miserable joke. According to MIR's own documentation, were MIR investors to actually try and cash out their investment, a quarter of their funds would be missing with no asset backing, with the scheme only working as long as scammed investors do not try to realize their fake 'profits'.

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