By PAULA OLIVER
Huge volumes of Tower shares changed hands yesterday after the company's profit warning on Wednesday, but a surge in trading the day before the announcement has caught the eye of the stock exchange.
The insurer surprised many in the market on Wednesday when it issued a profit warning
and unveiled plans for a capital raising and writedown of assets.
Tower's share price immediately plummeted, but heavy trading in the shares yesterday saw it recover 6c to $1.44.
More than 9 million shares changed hands yesterday, a sharp rise on the 6.8 million which traded on the day of the announcement.
But although that was out of the ordinary, a more mysterious spike in the trading of Tower shares the day before it revealed its restructuring plans has been noticed by the exchange.
On Tuesday, just over 2 million shares changed hands - significantly more than the daily average for Tower and the biggest turnover since February 2.
The stock exchange said last night that it was aware of the situation. A public statement would be made if anything more needed to be said.
While Tower shares recovered some value yesterday, the sentiments of its shareholders did not.
Shareholders Association chairman Bruce Sheppard slammed Tower's latest tale of woe, saying the company had misled people for years about its true value.
He said $135 million of a $190 million writedown on assets related to goodwill write-offs that dated to the company's inception.
Tower had carried that goodwill in its accounts as an investment and had not amortised it.
It is changing that practice after an external review.
"If you spread that writedown over the last four or five years they've been operating, and take it off for each year, what does it do to the profits that the market thought Tower was making?" asked Sheppard. "The real question is why has this been going on for five years?
"Why have auditors allowed Tower to publish five years of financial statements without amortising goodwill?"
Next Wednesday, Tower will disclose its half-year result - expected to be a loss of $180 million - and give details of its capital raising plans.
Speculation in the market is that pivotal shareholder Guinness Peat Group will play a driving role in the changes, and possibly even underwrite a rights issue.
Director Tony Gibbs yesterday refused to comment on the speculation that GPG was on target to take a big slice in Tower for a cheap price.
Tower trading
* May 19: 0.2 million shares traded.
* May 20: 2.06 million shares traded.
* May 21, 8.07am: Tower issues profit warning.
* May 21: 6.85 million shares traded.
* Yesterday: 9.38 million shares traded.
* Average trading volume, last 6 months: 0.54 million shares.
By PAULA OLIVER
Huge volumes of Tower shares changed hands yesterday after the company's profit warning on Wednesday, but a surge in trading the day before the announcement has caught the eye of the stock exchange.
The insurer surprised many in the market on Wednesday when it issued a profit warning
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