Rod Drury said in February that few at Xero knew about the capital raising. Photo / Jason Oxenham
Rod Drury said in February that few at Xero knew about the capital raising. Photo / Jason Oxenham
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Any leak may be on US side of capital raising.
An interesting detail emerged this week regarding the suspect trading in Xero shares that preceded the software firm's February announcement of a $147 million capital raising.
Sharemarket operator NZX confirmed on Tuesday that it had referred the trades - which prompted an unexplained spike in the software developer's share pricebefore the announcement - to the Financial Markets Authority on June 8.
Explaining the time lag between the February trades and the June referral, an NZX spokeswoman said much of the trading during the "relevant period" took place overseas, causing NZX Surveillance's review process to take longer than usual.
That's significant because Xero raised the cash in North America from US investors Accel Partners and Matrix Capital Management.
Xero chief executive Rod Drury has said the capital raising negotiations were kept closely under wraps.
"Very few people inside Xero knew about it," he said in February.
But that doesn't cover off the potential for information to have leaked at the other end of the deal, in the US. Xero shares jumped 26 per cent after the capital raising was announced to the market on February 25 - a tidy gain for anyone who bought the stock during the previous week.
At that time, Forsyth Barr's head of institutional broking, David Price, told BusinessDesk that the pre-announcement trading reeked "to high heaven".
He wasn't wrong. Insider trading seriously undermines investor confidence and if anything untoward did occur in the lead-up to Xero's capital raising announcement then hopefully the FMA will be able to hold the offenders to account.
That would be an unlikely outcome, however, given it's such a difficult offence to prove.
Chicken producer Tegel is expected to hold meetings with fund managers next week ahead of a planned sharemarket float.
The firm's owner, Asian private equity investor Affinity Equity Partners, is eyeing up an initial public offering (IPO) that could value the business at up to $1 billion.
A trade sale of Tegel may also be on the cards.
Affinity purchased the company for $605 million in 2011 from Australian private equity firm Pacific Equity Partners, which bought the chicken firm in 2005 for around $390 million.
Tegel is New Zealand's biggest poultry producer, with operations across the country and about 1700 staff.
Its holding company, Ross Group Holdings, reported a $14 million profit, from revenue of $517.2 million, in the year to April 27, 2014.
"It's worth taking a look at," one fund manager said of Tegel this week. "In theory it's not a bad business but it all depends on how the deal is structured."
GST news
Businesses could be in for some good news around reclaiming GST incurred during capital raisings, including IPOs.
Stock Takes understands a GST discussion paper covering a number of issues, including the fundraising matter, may be released next week.
As things stand, businesses cannot claim back GST incurred during capital raisings because the Inland Revenue Department considers financial services to be "exempt supplies" not subject to the tax. However, GST is incurred in capital raisings through services such as investment, business and legal advice.
Eugen Trombitas, a partner with accountancy firm PwC, told the Business Herald last year that the Government could be retaining about $10 million in unclaimed GST revenue annually from firms conducting domestic capital raisings. GST on costs associated with an offshore capital raising can be recovered.
Q: Who is to blame for the turbulence in the global financial market?
A: Probably the United States.
That's the view of the Chinese Government, or at least China's official news agency, Xinhua, which published that question and answer series - in English, for international consumption - over the weekend.
To be fair, Xinhua did go to the trouble of cherry picking quotes from the internet to support its argument, such as this one from Australian Treasurer Joe Hockey: "We're confident about our understanding of the Chinese economy and we see over time huge opportunities for growth."
Of course, Hockey - like his counterparts in New Zealand - finds himself in a politically awkward position, as Australia's economic fortunes are inextricably linked with China's.
No matter how bad things get in the world's second-biggest economy, he has to keep talking it up.
Meanwhile, Xinhua said the biggest factor driving global volatility was not China's turbulent sharemarkets, nor its worrisome growth outlook.
"The fundamental reasons for the recent global market turmoil are the anxiety aroused by the anticipated US interest rate hike and the fragile world economic recovery," the news agency said.
Feeling better now? Probably not, but at least markets made strong gains this week after some much-needed optimism that China will be able to stabilise its financial markets.
Japan's Nikkei gained 7.7 per cent - it's biggest one-day gain since 2008 - on Wednesday.
But the euphoria hasn't lasted, and many Asian markets fell back into the red yesterday because of concerns about the effect of an interest rate cut from the US Federal Reserve next week.
The Nikkei was down more than 3 per cent in early trading, and the S&P/NZX 50 closed down 0.01 per cent.
