KEY POINTS:
It's been a bad week to be a small investor in New Zealand, for four reasons.
* First there's the Rakon float.
If you were lucky enough to get Rakon shares in the initial public offering, you would have done very well indeed - the $1.60 shares issued
by the GPS chip company are now trading above $5.
But if you were unlucky enough to be a client of one particular brokerage you wouldn't have got any Rakon shares at all. This brokerage was given an allocation of Rakon shares to apportion out to clients but decided - in breach of NZX rules - to keep all the shares for itself.
So the capital gain of more than 200 per cent on Rakon shares went to the brokers and the poor unsuspecting clients got nothing.
The brokerage argues that it was given such a small parcel of Rakon shares that it wasn't worth breaking it up and handing out.
But it should have been up to individual clients to decide whether a small parcel of Rakon shares wasn't worth bothering with. What small investor would complain about, say, a $2000 capital gain on an initial $1000 investment?
This is another example of the small investor missing out while those in the know reap the rewards.
This firm's clients should desert it in droves, but they probably don't know about it because the NZX has refused to reveal the name of the brokerage or the broker involved.
Maybe it's your broker. You should ask.
* Then there's Kidicorp.
Shareholders who supported Wayne Wright's backdoor listing of the childcare business in 2003 can feel a bit hard done by.
Wright, who already owns half of the company, says he doesn't need shareholders anymore, because banks are so awash with funds he can do without investors' cash. And he doesn't appreciate their desire for their investments to pay dividends.
So now he wants to take it private again with a lowball 24c a share offer, right at the bottom end of the Grant Samuel independent valuation.
Wright's offer will likely succeed or fail depending on what Fisher Funds decides. So far the fund manager - which controls about 20 per cent of the company - hasn't made up its mind.
It would be fair to say Kidicorp has been a disappointment. In April 2003 around the time of the backdoor listing, the shares were trading around 25c. Just before Wright's takeover offer they were 18.5c.
At a time when the sharemarket has boomed, Kidicorp has underperformed the benchmark NZX-50 index by 120 per cent since 2003.
And now Wright wants to buy out the shareholders who have stuck with the company in the hope that the potential of growth in childcare can be realised.
Some shareholders might appreciate the opportunity to exit the company at 30 per cent above where the shares were trading prior to the offer.
Others might want to stick it out and share in any upside - but Wright has made it more than clear that he doesn't want them and won't be paying dividends in return for their patience.
* Third there's Software of Excellence.
It emerged this week that the company's largest shareholder - Australian investment firm Co-Investor Capital Partners - will receive a consultation fee of up to $350,000 if a takeover bid is successful.
The money is to be paid by Software of Excellence, but beyond stating that the fee is for "advisory services in relation to the offer" there's not much detail in the target company statement.
What is clear, however, is that small shareholders won't be receiving an advisory fee. Henry Schein, a Fortune 500 medical services company, will pay them just $2.70 each for their shares in the dental software company.
Co-Investor, however, will also receive $2.70 from Henry Schein and the equivalent to just under 8c a share from Software of Excellence should the takeover succeed. It has already agreed to sell its 16.8 per cent stake.
Much of the success of Software of Excellence in recent years can be attributed to the advice provided by Co-Investor and its managing director Roger Sharp, who is also a board member. Co-Investor invests private equity-style capital in listed companies and is undoubtedly a very useful shareholder to have on the register.
But however valuable the takeover advice that Co-Investor is providing to Software of Excellence might prove to be, it's hard to see this as anything other than a large shareholder getting more than a small shareholder.
* And last but not least comes Bridgecorp.
It seems that Bridgecorp's financial troubles were the worst kept secret in the New Zealand financial community.
For a year or more there had been mutterings about Bridgecorp going under, and yet small investors weren't told.
It would be interesting to know how much of the $500 million that the failed finance company owes investors is owed to financial advisors themselves, or to the trustees' and auditors' own family members.
Odds are not much.
Anyone who paid even passing heed to the business pages should have got the idea the Bridgecorp was heading for trouble, but it appears there was little to protect those unsophisticated investors who were lured by the interest payments of 9 and 10 per cent on Bridgecorp debentures.
Once again, it's the small ill-informed investor who gets stung.
It's little wonder that with news like this around, most Kiwis prefer to put their money in housing.
TOURISM HOLDINGS The payout of a 6c a share dividend to Tourism Holdings shareholders is effectively an increase in MFS Living & Leisure's $2.80 a share takeover offer.
MFS chief executive Marshall Vann has said time and time again MFS wouldn't increase its $2.80 a share offer for the company, and strictly speaking it hasn't.
But one of the conditions of the offer was that Tourism Holdings paid no dividends unless agreed in writing by MFS. Tourism Holdings contacted MFS this week to say it was planning a dividend and MFS agreed.
So now Tourism Holdings shareholders are getting 6c plus tax credits more for their shares, and if MFS gets hold of Tourism Holdings, it will find less money in the bank at the tourism attractions company.
So, should the takeover succeed, there'll be a transfer of nearly an extra $6 million from MFS to Tourism Holdings shareholders.
It may not officially be an increased takeover offer, but it's very close. And it will make shareholders think again.
MFS is struggling with its takeover bid, having so far won just 22.7 per cent of tourism holdings.
Yesterday's largesse may not help. Vann can say that he won't raise the offer until he's blue in the face, but shareholders are now more likely to hold out for an increase.
* Christopher Niesche is editor of the Business Herald
