The Stock Exchange pursues its own inquiry into the rights issue. DANIEL RIORDAN reports.
The Securities Commission is taking no action against Air New Zealand over its controversial rights issue prospectus but the Stock Exchange is continuing its investigation in what many investors consider a test of the local market's ability to enforce fair play.
"The commission considers that, on the basis of the information which it has, it would not be appropriate for it to intervene in the offer process," commission chief executive John Farrell said yesterday.
"It is for the directors [of Air New Zealand] to decide whether to allot the new shares in the terms of the offer documents and the Securities Act."
Mr Farrell declined to comment further.
Air New Zealand had no response beyond an even briefer statement: "The company fully cooperated with the commission's inquiry into statements made in the offer documents and is not surprised by the commission's findings."
However, the Stock Exchange's market surveillance panel is still investigating the issue.
Several of Air New Zealand's aggrieved sub-underwriters are understood to be waiting for the panel's decision before deciding whether to take further action against the airline.
The panel can take a wider mandate than the Securities Commission, which must legally confine its inquiry to examination of the contents of the rights issue prospectus.
The panel, for example, is understood to be examining what Air New Zealand said to institutional investors during a bullish roadshow that followed the issuing of the prospectus.
At issue is Air New Zealand's savage profit downgrade just two days before its $284 million rights issue closed last Friday, after stating in its rights prospectus that it was on track for a financially sound year. The issue closed 12.8 million shares undersubscribed, or $19.2 million, that had to be picked up by underwriters.
Stock Exchange chairman Simon Allen said he was aware of widespread market dissatisfaction with the rights issue on both sides of the Tasman, but he declined to comment on the commission's decision or the progress of the panel's investigation, which is conducted independently of the exchange.
"Anything that reflects dissatisfaction by investors is, and will be, taken very seriously.
"We will have to wait and see what the the outcome of the inquiry is to get a better explanation of what happened."
Tower Asset Management's equities head, Wayne Stechman, said the commission decision was almost expected.
"Given the prospectus' rather bland wording, I guess it's not that surprising."
Axa NZ equities head Andrew Bascand said Air New Zealand seemed to have covered itself with its prospectus.
"When you look at the prospectus, ... the timing of it and the information on hand at the time of the prospectus, I don't think there is a problem."
He said the directors' statement in the prospectus warning of the risks which might materially affect its trading or profitability was fairly comprehensive.
That statement covered possible increases in costs associated with jet fuel prices, movements in the value of the New Zealand and Australian dollars, competition in the Australasian aviation market and the progress of integration of Air New Zealand and Ansett Australia.
Following the final calculation of acceptances received in the rights issue, Air New Zealand yesterday issued 96,474,995 A shares and 92,691,551 B shares to underwriters and sub-underwriters. That lifted the total shares on issue to 385,950,980 A shares and 370,815,205 B shares.
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