The New Zealand Shareholders' Association has Turners Automotive Group in its sights after the auto and finance firm raised funds through a placement to sophisticated and wealthy investors.

The retail investor lobby group has been critical of those types placements, saying they unfairly dilute smaller shareholders, and that renounceable rights issues are preferable. Chief executive Michael Midgley said the NZSA will seek answers from the Turners board about its choice of process to raise $25 million at a 10 per cent discount without providing "substantive and relevant reasons for their actions".

"Turners has over 4000 shareholders with parcels of less than 50,000 shares. As a result, it is inevitable these smaller shareholders will end up being diluted," Midgley said in a statement.

"For those unable to participate, the situation is even worse. They get nothing, unlike the situation if a renounceable rights issue had been made by Turners."

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Brokerage First NZ Capital also questioned the need for Turners to dilute existing shareholders through the placement, saying in a note to clients today that the firm's balance sheet was strong enough to fund growth through increased debt. While the placement fell below the 20 per cent threshold needed to seek shareholder approval for a capital raise and had the SPP, FNZC said: "some minority shareholders may feel their interests aren't being fully considered".

The NZSA has said it's in favour of accelerated rights issues, where the institutional portion can be completed before the retail offer if funds are urgently needed by the company. That way, smaller shareholders don't find themselves at a disadvantage to institutional investors.

The Turners' placement was fully subscribed and didn't need to call on sole lead manager UBS New Zealand's underwrite, and a $5m share purchase plan opens for eligible shareholders and convertible bondholders tomorrow.

Midgley questioned why the placement was underwritten when the SPP wasn't.

"It is starting to look like underwriting is now on offer only when there is no real risk," he said. "NZSA will be looking at the costs of these transactions and whether shareholders are getting value for money."