Out-of-pocket shareholders are planning to sue for up to $250 million the directors, vendors and brokers who floated the failed carpet maker Feltex.
Law firm Wakefield Associates is gathering 1000 shareholders for a joint recovery action, which will probably be filed in early September.
Chris McVeigh, QC, recommended
Wakefield issue the proceedings.
Wakefield principal Garry Wakefield said the action would name the directors who signed the prospectus, CS First Boston Private Equity, CS First Boston Asian Merchant Partners, First NZ Capital and Forsyth Barr.
The directors named on the investment statement and prospectus were Tim Saunders, Sam Magill, Michael Feeney, Craig Horrocks, David Hunter, Peter Thomas and Joan Withers. Former chairman Saunders did not return calls yesterday and First NZ Capital chief executive Scott St John did not comment.
Wakefield said he understood that First NZ Capital and Forsyth Barr had an indemnity in respect of the prospectus from CS First Boston Asian Merchant Partners and Private Equity.
"It's not going to be a quick one but we are hoping that it will be put through the courts as fast as possible," he said.
Feltex was floated at $1.70 a share in June 2004 but subsequently revised its earnings forecasts several times and breached its banking covenants.
Receivers were appointed in September. The company, now called EXFTX, went into liquidation after the assets and operations were sold.
A report on Feltex was written for Wakefield by Alan Robb, adjunct professor at Saint Mary's University in Halifax, Canada.
"We've got Professor Alan Robb, who's an expert in corporate ethics and accounting standards, and his view is that the prospectus was misleading," Wakefield said.
The law firm currently had 500 people, with about 12 more signing up each day, he said.
Shareholders wishing to join the action had to contribute $980, which was also expected to cover costs if the action failed.
To qualify to take part, shareholders had to have invested in the initial public offering based on the investment statement, by cheque or conversion of convertible notes or by buying on market between June 2004 and March 31, 2005, and subsequently suffered a loss.
Wakefield said the amount being sued for would depend on how many people joined the action but could be up to $250 million.
