Rubicon, the forestry company spun out of Fletcher Challenge, has reiterated plans for an initial public offer for ArborGen, the biotech forestry company of which it holds a third.
The Auckland-based company has been mulling an ArborGen share float since August 2013, after an aborted attempt in 2011, though it has to weigh up the realisation of immediate value against what it could get in the future, chairman Hugh Fletcher told shareholders at its annual meeting in Wellington.
"To be clear, it is not a question of whether ArborGen can be IPO'd - unquestionably it can be," Fletcher said.
"Rather it is a matter of choosing the optimal mix of equity market conditions and business progress to execute an IPO of the company - to set an appropriate initial value of the company, at minimum dilution to existing shareholders, and to raise sufficient capital to secure its future growth."
In February, US hedge fund Libra Advisors took a $12 million stake in Rubicon, buying 29.3 million shares at 41.29c per share in a private placement to shore up the company's funding position and support its future commitments to ArborGen.
Shares of Rubicon closed up 13.6 per cent yesterday at 37.5c, although they have fallen some 69 per cent since its peak of $1.21 in March 2011.
Meanwhile, shares of Tenon, the wood mouldings business Rubicon owns two thirds of, closed up 8.6 per cent to $1.90 and have more than doubled over the past two years, having dropped as low as 50c during the sub-prime mortgage crisis and subsequent global financial crisis.
The rise in Tenon's share price should be reflected in gains for Rubicon stock too, said Fletcher, and signals investors are underestimating the value of ArborGen.
"Our view is that the current Rubicon share price is a very poor reflection of the long-term value of these underlying investments.
"The share price is simply not recognising the progress being made," he said.
Fletcher also blamed the relative illiquidity of the stock, with three-quarters of the company held by six shareholders who "unless they absolutely have to, do not trade their shares, because they believe in Rubicon's future value upside".
"If Rubicon had surplus cash today we would immediately undertake an on-market share buyback programme to correct the situation - it would overwhelmingly be the best use of our cash," Fletcher said.
"However, at the moment our hands are tied, as we need to preserve all our cash for ongoing investment into ArborGen."