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Fallen childcare entrepreneur Eddy Groves has acted on a threat to sue his former stockbroker over an alleged botched share transaction.
Mr Groves claims he was in Las Vegas when he first requested his stake in Austock Group be sold over fears of a margin call.
According to documents filed with the Supreme Court of Queensland yesterday, the ABC Learning Centre's founder had numerous conversations with Austock staff from early January 2008, advising that he would be facing a margin call if the share price of the childcare operator continued to fall.
"I am going to need to sell my Austock shares in case this happens," Mr Groves alleges he told Austock adviser Ryan Whitelegg during a call from the US.
"Do you think any of the founders or large shareholders who Austock has a relationship with would buy my . . . shares?"
Mr Groves is suing the Melbourne-based brokerage, which helped to launch his company, for $7.4 million in damages, plus interest and legal costs, accusing it of negligence over its failure to act upon his instructions to offload five million shares in early 2008.
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The litigation has come as a surprise to many in broking circles, given the firm was considered integral to the meteoric rise of ABC, which collapsed in 2008 and is being wound up.
Mr Groves claims that after the initial approach, he had conversations with Mr Whitelegg and the firm's then managing director Tim Boyle, saying he wanted to maximise the price in any sale, and was advised inquiries were being made.
But on February 26, the price of ABC shares fell significantly, triggering calls on two of his margin loans. Citi Australia sold 6.9m ABC shares while Citi Singapore agreed to delay selling 10m shares held as collateral under a $25.9m facility. According to Mr Groves, Austock agreed to sell his Austock shares at market price or greater but later advised it would not be able to meet a bank deadline.
- reprinted from The Australian