Feltex Carpets' former executive director Peter Thomas likened the company's 2004 float to a lemon from which most of the juice had been squeezed out, according to an email cited at a court hearing into a shareholder lawsuit.
The email was cited by Austin Forbes, lawyer for former shareholder Eric Houghton, who is suing the former Feltex directors, owners and sale managers for $185 million in a representative action on behalf of 3,639 former shareholders who say they were misled by the prospectus.
"It was a tough deal - every man and dog wanting a piece of the pie," Thomas said in an email to a Credit Suisse executive after the IPO, according to Forbes. "There's some goodness left in the lemon but we squeezed most of it out. Not bad for a company that was bankrupt 18 months ago."
The email was one of a number cited by Forbes and is within the documents filed for the hearing. In an earlier email, from Thomas to other board members in February, months before the IPO, he gives advice to any "participants" disgruntled that Credit Suisse was taking its money out when other directors were required to retain some of the stock for 12 months.
"Obviously those participants think it's a lousy investment and why should anyone buy them," the email said, according to Forbes. "Hit your projections in the prospectus and it should not happen."
But he also suggested they could buy a put option on the ASX, if not the NZX, which would have value if the market collapsed.
"It is evident there was concern about participants having to keep their shares described in the vernacular by Mr Thomas as lousy shares," Forbes told the High Court in Wellington.
Forbes also went through a catalogue of documents showing Feltex's monthly sales were below year earlier revenue in early 2004.
Houghton bought 11,755 Feltex shares at $1.70 apiece, or $20,000, in the initial public offering in May 2004, drawn to an investment that offered a gross dividend yield of 9.6 per cent. All up, vendor Credit Suisse First Boston Asian Merchant Partners, represented on the board by Peter Thomas, raised $193 million, selling 113.5 million shares, and Feltex raised a further $50 million to repay bondholders.
Within a year the stock was virtually worthless, thanks to a series of warnings that the company would miss its prospectus forecasts, and receivers were appointed in September 2006. Australian carpet maker Godfrey Hirst ended up buying the assets.
Of the directors, Tim Saunders, Sam Magill, John Feeney, Craig Horrocks, Peter Hunter and Peter Thomas all had a financial interest in Feltex, Forbes said. Joan Withers, the other first defendant, was the exception.
Credit Suisse Private Equity, the promoter of the sale, is second defendant, while owner Credit Suisse First Boston Asian Merchant Partners is third. First NZ Capital and Forsyth Barr, which managed the IPO, are fourth and fifth defendant.
The case is continuing and is set down for nine weeks.