Two fund managers are seeking support for a class action by shareholders of software company Wynyard Group to recover losses since the share price has plunged following a disappointing annual result and a heavily discounted rights issue to raise cash.
The campaign is being driven by Logic Funds principal Greg Marshall, who successfully waged a campaign that led to a $60 million settlement for Credit Sails investors, and Australian-based Millinium Capital managing director Tom Wallace.
Neither man is a current Wynyard shareholder and their plan is to receive part of a 20 per cent fixed percentage fee from any successful court order or settlement if the class action proceeds.
Marshall said preliminary investigations focused on whether Wynyard may have misled investors in statements relating to two key areas: reported revenue for 2015 of $26 million falling well short of its guidance of $40-to-$45 million, and director comments on the status of the deeply-discounted $30 million capital raising in March.
The campaign has been kicked off to coincide with the crime-fighting and security software developer's annual general meeting in Auckland this afternoon, where they plan to try to attract shareholders to join the action, he said.
The Wanaka-based funds manager said initial interest online from shareholders in the past week has been positive but a critical mass of affected shareholders was needed to pursue a class action.
The period in question is from August 1, 2015, to February 16, 2016, during which time Marshall estimates more than 20 million shares changed hands with losses of potentially $30 million because of the share price decline.
Wynyard shares are currently trading at 64 cents, having tumbled from about $1.50 after the company said its planned share placement at about $2 per share was no longer viable. It then reported a net loss of double the previous year's $22.2 million after contract revenue didn't materialise on time and the company made a heavy investment in new staff. Total operating costs were $57 million.
The company eventually raised $30 million at 85 cents a share, well below the minimum $2 shareholders had approved in December because it needed the extra funds to meet its working capital requirements by the end of March. Since then it's had a major boardroom refresh and a new chief financial officer appointed.
Litigation funder Vannin Capital is the front-runner to take the case if the action gets sufficient shareholder support.
Marshall said this campaign is quite different to the three-year Credit Sails one where the Commerce Commission was involved in reaching a settlement with the companies involved in marketing the product - broker Forsyth Barr and French merchant bank Credit Agricole Corporate & Investment Bank - for $60 million to compensate losses estimated at $70 million
That case involved action to get redress under the Fair Trading Act and was more "clear-cut", he said. He has laid a complaint with the Financial Markets Authority over Wynyard.
These types of class actions were not common in New Zealand but "they've nailed down the process a lot in the last year", he said.
Last month Wynyard was queried over a 21 per cent slump in its share price in a two-week period but said it had nothing to disclose. The company was spun out from Christchurch software firm Jade and listed on the NZX in 2013 at an issue price of $1.15 a share. Its shares peaked above $3 in 2014.
It has forecast 2016 revenue to be between $54 and $65 million. The shares were trading at 65 cents today.