Agua Del Paine Ltd Case Study - Eliminate Toxins - Law Assignment Help

Assignment Task :

Question 1 

Agua Del Paine Ltd (ADP) bottles and sells artesian water sourced from glacial springs in the  mountains of Patagonia, Chile. The water, marketed as Vida, is considered to contain high  oxygen levels and minerals that help the body to eliminate toxins. 

ADP recently secured the water rights to the glacial springs at the base of the Puerto glacier,  one of Patagonia’s largest glaciers. As global warming prompts the glaciers to melt at faster  rates, the area is quickly becoming one of world’s most water-rich areas. ADP plans to grow  its business to increase distribution to the Australian market, which currently represents 20%  of its sales. 

To facilitate these plans, on 1 April 2019, ADP issued a prospectus for an initial public  offering (IPO) on the Australian Stock Exchange (ASX) inviting subscribers to apply for  fully paid ordinary shares in the company. The offer closed in October 2019.  

The prospectus included the following statements: 

• ADP’s net profit after tax for the financial year ending 31 December 2019 was  expected to be $7.65 million. 

• Over the next 5 years, ADP’s net profit after tax was projected to quadruple.  

On 11 October 2019, ADP was admitted to the official list of the ASX and announced that it  had raised $6,819,320 from the IPO. Its securities became admitted for quotation on  12 October 2019. The total number of ADP ordinary shares on issue on listing was  10,000,000.  

Between July 2019 and September 2019, ADP incurred additional costs of $1.6 million for  the construction of its processing facility in Puerto due to unexpected delays during ground  excavation. 

In November and December 2019, protests were held at the construction site for the  processing facility. A group of locals, concerned about the degradation of their fresh water  reserves and the environmental impact of the project, were protesting for the Chilean government to place restrictions on ADP’s water rights in the area. The protests have since  paused while Pablo, a representative of the group, attends a series of discussions with the  Chilean Department of Environment and Water to air their concerns.  

Juano, the CEO of ADP, has significant experience negotiating deals with the Chilean  government. Juano has told the Board that he is convinced the matter will be resolved  promptly, and well before the date that water extraction is set to commence in April 2020.  

However, as a result of these circumstances, on 18 February 2020, the company announced  that its actual profit for the year ended 31 December 2019 was $4.3 million. Following the  announcement, the price of ADP shares fell from $0.88 to $0.66.  

Frank acquired 10,000 shares in ADP as part of the IPO at an issue price of $1.00 per share.  On 12 December 2019, Frank acquired a further 5,000 ADP shares at the then market price of  $0.76.  

What remedies, if any, does Frank have against ADP or its officers under the  Corporations Act 2001 (Cth)? Do not discuss CA Pt 2D.1 in your answer. 

Question 2 

Assume the facts in Question 1. 

Don’t Go Brokers Ltd (DGB) holds an Australian financial services licence authorising it to: 

• provide general financial product advice for securities,  

• deal in securities, and  

• underwrite issues of securities.  

DGB provides investment banking and traditional stockbroking services (including research)  to its clients.  

DGB was the lead manager for the ADP IPO. In the IPO, 152,000 ADP shares were issued  to nominee accounts controlled by Gavin, a director of DGB and head of its investment  banking division.  

In December 2019, DGB emailed a research report on DGB to its clients, including Frank.  The research report was authored by an analyst in the research division of DGB and reviewed  and amended by Gavin before it was released. The research report stated a “buy”  recommendation for ADP. The research report disclosed DGB’s role as lead manager for the  ABC IPO, and included the following statement:  

“The analyst and/or DGB and/or associated parties may have beneficial ownership of  ADP shares. Care has been taken by the analyst/s to maintain objectivity in the  preparation of this report.” 

In January 2020, Juano telephoned Gavin, informing him that ADP might not achieve the  profit forecast made in the Prospectus and requesting a meeting for the following day to  discuss options.  

Gavin immediately contacted his friend Lisa by Whatsapp and told her that he was concerned  about the falling ADP share price. He asked her to buy 50,000 ADP shares in her own name  as a favour to him and hold on to them for a month or two. Gavin promised to cover any  costs or losses incurred by Lisa. Lisa acquired the shares on 20 January 2020

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