Prominent investment and legal experts are delving into the governance challenges at Humm Group, a non-bank lender that provides financing for various sectors, including construction, trucking, and agriculture. Kelvin Barry, co-head of investment banking at UBS Australia, and Sandy Mak, a leading corporate lawyer at Corrs Chambers Westgarth, are part of a three-member panel tasked with examining the company’s recent governance issues.
Humm Group, which offers credit products such as split payments and credit cards, has come under scrutiny for its high-interest lending practices, charging 27.3 percent interest on purchases. This model has drawn criticism compared to traditional banks, particularly given its high rate of credit losses. The panel, which also includes Deborah Page, a director at NextDC and Magellan Financial, is addressing concerns regarding Humm’s disclosure processes related to a bid from Credit Corp.
The situation escalated when Humm’s founder and major shareholder, Andrew Abercrombie, purchased an additional 3 percent of Humm’s shares shortly after the company disclosed an indicative takeover bid from Credit Corp. This move has raised flags among investors and analysts about potential conflicts of interest. The panel was formed to investigate the governance crisis triggered by these developments, an unusual assignment for professionals typically engaged in high-stakes corporate transactions.
Investors Seek Accountability Amid Governance Concerns
Humm Group has garnered significant attention from investors and legal professionals alike, as it represents a unique opportunity in the lending market. The company has been described as a “sticky honeypot” for investors looking to capitalize on lending to customers that traditional banks may overlook. Despite its appeal, Humm has faced challenges, including a significant drop in share price—down approximately 80 percent over the past decade.
The panel’s investigations will also focus on the governance structure of Humm, particularly in light of Abercrombie’s longstanding association with the company since its public listing in 2006. In a notable move, two groups of Humm investors have called for a shareholder meeting aiming to remove Abercrombie and two other directors under Section 203D of the Corporations Act. This demonstrates the growing discontent among shareholders regarding the company’s management.
Proxy advisory firms CGI Glass Lewis and ISS altered their recommendations last week in light of the panel’s preliminary findings, advising against the re-election of Abercrombie and Robert Hines, Humm’s chairman. The firms highlighted deficiencies in Humm’s management of conflicts of interest, particularly during its dealings with Credit Corp.
Path Forward for Humm Group
The panel, which began its work a month ago, has already made significant advancements in scrutinizing Humm’s governance issues. Their findings have led to important concessions from Humm, including the establishment of an independent board committee to consider the proposal from Credit Corp and the appointment of the CEO as managing director. These steps aim to enhance transparency and accountability, essential for rebuilding shareholder confidence.
As the panel continues its work, they are also examining past disclosures and share acquisitions. Humm has a history of tumultuous dealings, including a failed sale of its consumer-facing businesses to Latitude Financial that was halted by Abercrombie. This legacy of unresolved issues adds pressure on the current governance structure to adapt and respond effectively to shareholder demands.
With a crucial shareholder meeting scheduled for February 12, 2024, investors are eager to see the outcomes of the panel’s deliberations. The decisions made by this influential group could reshape Humm Group’s future and set a precedent for governance practices in the non-bank lending sector. As the situation unfolds, Humm Group is at a pivotal juncture, needing a reset to address long-standing concerns and restore investor trust.
