Rothschild’s Bumi slumps
Sep 27, 2012
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Shares in Bumi, an Indonesian coal miner, slumped by 25% to below 150p early this week. The group said it was investigating “potential financial irregularities” at its subsidiary, Bumi Resources.
A report by a whistle-blower allegedly suggested that hundreds of millions of dollars set aside for an oil development programme may have been diverted. Financier Nathaniel Rothschild brought Bumi to market in 2010 as a cash shell, with the money used to buy Indonesian mining assets. At its flotation it was worth £10.
What the commentators said
Rothschild hoped to spread UK corporate governance standards to emerging-market assets, said Andrew Peaple in The Wall Street Journal. But after a series of problems, those who bet on that vision “have him to thank for an 85% loss”.
Before the latest news, Rothschild had already ended up in a power struggle with Indonesia’s Bakrie family (from whom he bought his share of Bumi Resources), who had taken a 47% stake in Bumi. That came after he criticised non-core investments and loans Bumi Resources had made. “The criticisms struck many as rather hollow” as he doesn’t seem to have raised them when he first reversed Bumi Resources into his shell company.
“None of this would matter so much”, said Nils Pratley in The Guardian, if it were merely a case of rich bankers losing money. But “everyday savers” are involved through pension funds. These track the FTSE 250 and All-Share indices, of which Bumi is a member. So this affects London’s reputation as a financial centre. It is “surely now time to call a halt to the rush to London” of foreign miners with “subpar governance arrangements and complicated shareholding structures”.
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