In corporate governance terms, former MIM managing director Vince Gauci can hold his head high for resisting pressure from his board and rejecting the opportunistic Xstrata takeover bid back in 2003.

History now tells us that the board’s craven cave-in has cost Australia billions because commodity prices took off shortly after MIM was swallowed by the Swiss company.

Gauci has kept a pretty low profile since then but he deserves to be asked some hard questions about his share trading in Coates Hire last week.

As we all know from reading the press, the Coates board rejected a $6.25-a-share offer from a consortium involving National Hire last week. It is understood the offer included an additional 27c in franking credits. The timeline is as follows:

August 29: Coates announces full year results, including this letter explaining that takeover bids had “failed on price”, without disclosing the detail of the bids.

September 3: lodges notice about director dealings, including that Vince Gauci bought 19,243 shares at $5.14 a pop on 29 August, a total spend of $98,909.

September 5: National Hire and private equity firm Carlyle reveal they lodged a revised offer worth $6.40 a share on 31 August, which is still being considered.

Coates shares plunged from $5.65 to $5.15 on 29 August and Gauci picked up his shares right at the bottom. However, they recovered a tidy 27c to $5.82 yesterday and if the $6.40 a share offer is accepted, Gauci will pocket a quick-fire $24,000 profit in a very short period of time.

It is quite obvious that Gauci’s intent was to show his support for the company after it released results and rejected takeover offers. But it was completely inappropriate to start buying shares when the market had not been told the original bid price was $6.25.

Besides, it is now abundantly clear that Coates was still in play. Gauci finds himself in an impossible position because if he turns around and endorses any subsequent bid, he’ll be open to charges he changed his position to make a quick profit on his share dealings.

There’s a lesson for all directors in this – do not trade shares when there is even a hint of corporate activity. Simply rejecting an initial takeover bid is no green light to start buying because we all know that predators often come back for a second crack.

The corporate plod should be inviting Gauci in for chat to establish exactly what he knew at the time of his trades.