Gaynor on Wednesday: Cheap shares for a selected few

Property for Industry


Why do listed property companies continue to shoot themselves in the foot? On Thursday, Property for Industry (PFI) announced the placement of 17.9 million new shares, representing 10 per cent of the company's capital, at 77c a share to a select number of existing shareholders.

The new shares were issued at an 8.3 per cent discount on the average sharemarket price of 84c during the previous 10 days.

PFI's market price has since fallen to 80c.

Who received these shares? How were the recipients selected? Why were the new shares not offered to all shareholders on a pro rata basis? How was the issue price determined? Has any limitation been placed on the sale of these shares?

Share price gains are hard to come by in the listed property sector, and the recently released PFI annual report makes a big point of the company's 76c to 81c share price appreciation during last year.

In this difficult environment, why have shares been issued to a few selected investors at such a large discount?

Nearly four years ago, Shortland Properties made a controversial placement of 10 per cent of its capital to a selected number of investors at 94c, a 7.8 per cent discount on the 102c market price.

Shortly afterwards, Shortland had a one-for-four rights issue at 94c, and its shares went into a tailspin. They never recovered and the company was finally taken over by Capital Properties for 76c a share.

Property for Industry has managed to increase its shareholder base in recent years. Share placements to selected shareholders at large discounts will quickly reverse this trend.

Dorchester Pacific


Retired politicians, particularly finance ministers, have had a poor record as company directors when measured in terms of share price performance. Dorchester Pacific, which recently appointed Sir William Birch to its board, will be hoping to break this trend.

Sir Roger Douglas joined Brierley Investments in October 1990, had a stint as executive chairman and resigned in March 1999. BIL's share price went downhill during his term on the board.

Ruth Richardson was on the board of Dairy Brands when it was floated to the public in September 1995 at 90c a share.

She later became chairwoman and resigned in December 1999 when Dairy Brands share price was 26c.

Ms Richardson was appointed to the Wrightson board in February 1995, when its share price was 107c. She is still a director of the former Fletcher Challenge company. Its shares closed yesterday at 62c.

What are the odds that Sir William will break this trend and outperform his predecessors from the finance portfolio?

Affco


Affco, the beleaguered meat company, badly needs a good communications manager.

At February's annual general meeting, chairman Sam Lewis painted a very optimistic picture of the group's prospects.

Five days later, chief executive Ross Townshend resigned, effective April 30.

Since then Affco has made no announcements to the Stock Exchange, yet Mr Townshend has already left, other senior staff have resigned and jobs, pay and costs are being cut.

Mr Lewis, who has become executive chairman until a new chief executive is appointed, told the Business Herald that he wanted Affco to be more like the publicity-shy southern companies, Alliance and PPCS.

But Affco is a listed company with Stock Exchange requirements to keep its shareholders informed. The company is falling well short of best practice in this area.

* bgaynor@xtra.co.nz