Readers of my blog will know that I am a shareholder in Treasury Wine Estates, and that I recently attended the Treasury AGM – mostly to enjoy the free drinks afterwards (mostly Penfolds Bin 28 shiraz).
During the AGM, someone on the Board mentioned that TWE is doing very well in comparison to other wine companies.
This did cause me to reach for my smartphone and check recent news about Australian Vintage Group on the Commsec app.
I don’t often mention it, but for a while back there, I was a shareholder in the only other wine company listed on the ASX, Australian Vintage Group (formerly known as McGuighans).
I think I probably paid about 60 cents per share for my AVG shares, but I thought that it was worth a punt as it was a rather small holding in the greater scheme of my portfolio, and they did seem to be a very viable company.
In June of last year, just before I started my pre-retirement leave, I was sitting in front of a travel agent at Flight Centre, discussing bookings for my then upcoming trip to Italy. Whilst the agent was checking flights or hotels for me, I idly checked my share portfolio on the Commsec app.
To my chagrin, there was an announcement from AVG, whose share price had been declining over the time since I bought the holding, advising the bourse that they were not planning to pay a dividend in December (AVG only ever pay one dividend each year).
Given that I tend to subscribe to the view (except when I speculate on penny dreadfuls) that if a company stops its dividend payments, then it is time to sell, I put in an immediate sell order and got out at 40 cents. So… I think I lost about $2000 – a minor OUCH! The money came in handy for my trip for Italy, and for my epic retirement party.
Since then, I have occasionally paid attention to AVG’s performance on the Commsec app.
Just about what has happened since I sold my shares 14 months ago is not good news.
The board of AVG did talk about a major review, suggesting that sale of the entire business was not off the table. Reading that was not inspiring to me about the long term viability of the business.
Earlier this year, the then-board sacked the CEO for undisclosed reasons. This more or less coincided (not that I have followed the company news that closely as I no longer have a dog in that fight) with a major drop in the share price from around 35-40 cents to 15-20 cents.
Again, this made me feel like I had dodged a major bullet – the biggest since I had sold my Harris Scarfe shares out of a mix of boredom and frustration about six weeks before they went into administration in early 2001.
Back to sitting in the front row at the TWE AGM last week – there was a new announcement that the newly appointed board had reappointed the previously sacked CEO to his former job. I had not known that there had been a purge of the AVG board, nor why this had happened – although the lacklustre performance of the company was indicative that the board probably deserved the chop (something which rarely happens to miscreant boards).
I did not fall out of my seat in astonishment, as I don’t really have a dog in the fight anymore, but I was a mix of bemused and amused. How is it that a CEO can get sacked for supposedly inappropriate behaviour, and then, Lazarus-like, return to the same job six months later?
The corporate governance issues sound like an MBA case study in the making. On the one hand, you could argue that the once and future CEO was in the wrong and has somehow been able to turn it around onto the board. On the other, the board over reacted to something or made a very seriously questionable decision, causing them to be pushed out by investors.
In either case, it is a farce.
Regardless of who was in the right or the wrong, I am not planning to invest in Australian Vintage Group again in a hurry. Everything that has happened since last June has caused me to have considerable doubts about the long time viability of that company.
Lost For Words! 