Wealthy Canterbury families and other investors are bailing out of Pyne Gould Corp ahead of its $237 million rights issue, according to brokers.
The company's share price plunged 28.57 per cent to be 50c in afternoon trading and brokers said the volume was ten times usual turnover. The stock has
fallen from $3.65 last October. It fell 11c to 70c yesterday.
The price is now just a small distance from the 40c the company is selling new shares at in the rights issue announced last week when the shares were trading at 99c.
Brokers said shareholders who did not want to buy six shares for every one they currently held were selling and they were not waiting to trade their rights entitlement.
"The existing share register is struggling with the size of the rights issue," said a broker who declined to be named.
The company's shareholders have been loyal investors and few of them are institutions.
"It is a very old register. The Christchurch families' share wealth has been absolutely devastated," the broker said. "I'd say a lot of them are in shock."
While a new company is said to be emerging from the recapitalisation process, that company is unproven.
PGC shareholders are currently hearing from the company at a meeting in Christchurch Town Hall. An admission card was required for entry, effectively excluding media.
The rights issue has fees totalling $13 million and is underwritten, which guarantees its success.
Pyne Family Holdings, a company associated with director George Kerr, which has a 10 per cent holding, will take up its entitlement under the offer, being 59.2 million shares for $23.68m.
Pyne Family Holdings will also sub-underwrite the rights offer to the tune of $27.2m. The underwriter is paying a sub-underwrite fee of $407,727 to Pyne Family Holdings, according to the prospectus.
Brokers said the share issue was increasingly likely to be picked up sub-underwriters.
There is speculation a large Australian investor may be a sub-underwriter but typically institutional investors can also sub-underwrite.
- NZPA
