Thursday, 3 July 2014

The Macquarie Atlas Roads Group revaluation fraud

Macquarie Atlas Roads Group (MQA.AX) is an ASX-listed revaluation fraud masquerading as a toll road operator. An investment cartel headed by Macquarie controls the "market" price of MQA, and has ramped the stapled security in order to fraudulently obtain inflated management fees. The top 20 shareholders own 91% of MQA and control its share price. This revaluation fraud is the true purpose of MQA, the real reason for its creation and existence. At heart, MQA is no different from Fifth Element Resources.

Like other such scams, MQA is structured in a Byzantine maze of related parties, crossholdings, loans and sham transactions. MQA's annual report is deliberately deceptive, packed with accounting fraud designed to obscure a very simple business model. MQA's assets generate $49m of cash flows, of which the criminal managers absorb a base fee of $18m. After this 37% fee, the remaining $31m is available for distribution to victim investors. If MQA's share price was not openly controlled by a cartel, it would have collapsed. Instead it was ramped to a $1.6bn market cap, packaged in financial "products" and dumped on granny investors.

As a result of the ramp, the criminal managers entitled themselves to a staggering $58m "performance fee". No magical unicorns or leprechauns need be presumed to explain this straightline ramp. The explanation to this mystery is depressingly simple. A small group of criminals had the power to move the share price, and would benefit handsomely from doing so. So they did.

It is highly likely that the investment cartel that ramped MQA during the past year explicitly discussed their fraud in company emails and on recorded telephone lines, including the exact endpoint of their ramp. Macquarie is a criminal organization that considers itself above the law. But since ASIC operates a zero enforcement policy, this will never be investigated and the criminals will die as free rich men.


  1. Would you accept that you may have more impact if you removed the emotive language from your posts? No doubt you are familiar with the output of professional shorts like Muddy Waters or Gotham, or even Bronte Capital, all of which provide a model. Similar detailed technical reports may also enhance your impact.

    1. I think there is too little outrage against pervasive financial crime, not too much. This blog is an exposé of crime, not an "investment case" or any such nonsense, so your comparisons are inappropriate.

  2. Your post about MQA.AX is apparently based on concern for "granny"investors. However, non-Macquarie professional investors hold 70% of shares, far more than any grannies who are included in the 9% of shares held by investors outside the top 20. If grannies are "victims" then so are the non-Macquarie professional investors. Why would they tolerate being victims? They don't benefit from the fees paid to Macquarie. They cannot all sell their shares at an inflated price, they hold too many. You may not like Macquarie's fees, but they are plainly visible to the professional investors who continue to hold the shares. Where's the criminal conspiracy?

    1. The ultimate owners are granny investors. I.e. when Macquarie or another institutional investor is listed as the substantial holder, they package these holdings into their fund and life insurance products. These products then boast awesome "unrealized" manufactured profits, based on which the fund manager derives fees. The faked performance figures are then used as bait for new victims.

  3. Full disclosure, last century I worked for MQG, when it was a very small private company. I was also involved in the very first 'inflation linked' investment pricing.

    Assuming MQA.AX's revenue is inflation linked, and assuming Dr Benways calculation of 31mm of distributable income is correct ( and completely ignoring if $18mm is fair or not) then ...

    a very rough estimate of value would be to consider this an inflation linked bond and price accordingly.

    So what is a fair real yield to use, GSIO40 is the longest eTIB , it has a 1.25% coupon and trades at 117 so its effective couplon yield is around 1.06% (ignoring the pull to real par of the principle repayment which actually lowers real yield a lot).

    So lets be really conservative and use a 2.5% real rate for
    So 31mm / 1.25% = 1.24 Billion dollars. Ok thats not 1.6Bn but its same order of magnitude.
    So what is the real yield of MQA at 1.6Bn ?
    Answer 1.9% !
    which is lower than I would want, but not completely off base given the global low yields engineered by the Central Banks.

    1. You are missing the point here. The point is that Macquarie has market moving positions in entities that they derive "market" price based fees from. This is absolutely fraudulent.

      More generally, Australian finance criminals use a simple yet effective method to inflate assets. Start with an entity holding assets worth X due to the cash flows generated. Create another entity that absorbs the cash flow from the first. Then value the first entity at X because of the assets it owns, and the second entity at X because of the cash flows it gets. Voila! You have 2X worth of assets, due to the magic of fraud.