Why exchange suspended NZI
The Stock Exchange yesterday replied to NZI Corporation’s criticism for suspending the company’s shares on Tuesday.
NZl’s managing director, Mr Harry Kember, said on Tuesday that the Stock Exchange’s decision to suspend the company’s shares, because of the cancelling of a rights issue, was over-reaction. The suspension had done incalculable harm to NZl’s international reputation, he said. In a statement yesterday, the Stock Exchange said NZI had not consulted it on the content and implications of its announcement before the report was released. The suspension of the company’s shares was to prevent trading in an "uninformed” market. The suspension was to seek further information. and was not an implication of censure, the exchange said. Factors in the suspension were: • • NZI had taken the unusual step of cancelling an issue after almost 45 million rights had been traded and the issue closed.
• The exchange believed NZI had a duty to inform the market fully on the reasons for cancelling and making a new share issue, the alternatives, and the position of all shareholders. The press statement on Monday did not provide this information, leaving investors only partly informed and confused, the exchange said. • Before the exchange’s morning call on Tuesday it became clear that the market was not adequately informed. Confusion developed about the basis for the company’s decision as it materially affected those who had bought rights. • It was necessary that the exchange examine the basis of the company’s decision to withdraw its
prospectus, and because of concern that investors might not be adequately informed it was decided to suspend NZl’s shares. The company had tacitly admitted uncertainties existed. In making subsequent announcements it said the forthcoming new issue would be on identical terms, clarifying the confusion of the original statement that the issue would be on "similar” terms, the exchange said. In addition, it was later announced that application money from the issue had been put in a separate interest-bearing trust account, from which interest would be paid and refunds made to applicants. These matters were important to the investors affected, the exchange said. “The exchange totally rejects any suggestion that the suspension for a single trading session was substantially responsible for the fall in NZI
Corporation’s share price on Tuesday.” NZl’s decision to cancel the cash issue after acceptances had closed was likely to question the reliability of rights issues announcements and procedures, which had been a large part of New Zealand and Australian capital raising structures for years. “The suspension notice stated clearly that trading would be resumed as soon as the matter had been clarified to the exchange’s satisfaction, and in fact the suspension was lifted at the earliest possible time.” NZI proposed the issue of one new ordinary share at 60c and a unit of 60c convertible, subordinated loan stock for every four NZI
shares, when the company announced a total loss of 5179.6 M for the six months ended September 30, on November 21. Shareholders who took up the rights to the new issue were to be required to subscribe for the loan stock. Meanwhile, a statement by NZI on possible legal action against the exchange has been delayed. NZl’s corporated affairs adviser, Mr Owen Cook, said the group’s legal experts were experiencing difficulties in preparing a case because NZI was an international company. Mr Cook said NZI was still receiving calls yesterday from international institutions and investors worried by news of the suspension. Reaction to the news that NZI shares had been suspended for technical reasons was one of disbelief, he said.
Investment sold NZI reports it has sold its 19.9 per cent holding in Western Capital, a listed Western Australia investment company. The purchaser is Compagnie Financiere de Paribas, parent company of the Paribas Group, a banking group based in Paris. NZl’s managing director, Mr Harry Kember, said the sale was consistent with NZl’s stated policy of concentrating on core businesses. The price was not disclosed, but the sale was concluded on very satisfactory terms for NZI, Mr Kember added. The sale is subject to the approval of Australia’s Foreign Investment Review Board.
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Press, 23 February 1989, Page 35
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685Why exchange suspended NZI Press, 23 February 1989, Page 35
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