Brian Gaynor: JBWere's $50,000 contribution puzzling

Mark Weldon, who is a big baseball fan, has been batting over .400 since he took control of the Stock Exchange two months ago. This has been a phenomenal performance as it is 61 years since anyone batted over .400 in the major leagues.

But Weldon is learning that it is extremely difficult to maintain this average, particularly when one of his team mates is reflecting the sun into his eyes.

When JBWere bought 50.33 million Rubicon shares through the market on July 4 it seemed to be a clear breach of Stock Exchange rules that required part of the offer to be open through all sharebrokers. The exchange said it would investigate the transaction, and there was widespread belief that its disciplinary committee would find against JBWere.

But last week Weldon announced that "the NZSE now had information, that had not previously been disclosed, about the basis on which JBWere was satisfied that it was acting in accordance with Rule 8". In other words, JBWere is not guilty but has agreed to pay $50,000 toward the cost of redrafting the NZSE Rules and Regulations.

Why is JBWere making a $50,000 contribution to the Stock Exchange if it did not breach the rules? How were JBWere's actions consistent with the rules? Why did Weldon not release details of the new information he received? Why is it so difficult to find breaches of simple and easy-to-understand rules?

The obvious answer is that JBWere sought high-powered legal advice which - surprise, surprise - found that the Rubicon transaction did not breach the rules.

But if JBWere really wanted to find out the correct interpretation of the rules, why didn't it go to Weldon in the first place?

IT Capital

IT Capital's shareholder meetings are lively events and last week's was no exception. It could have been the Fight for Life with Bruce Sheppard in one corner, Maurice Bryham and David McKee Wright in the other and chairman John Robertson trying to keep them apart.

Bryham threw the first punch when he accused Sheppard of making derogatory remarks concerning the three new companies that he and McKee Wright were selling to IT. Bryham argued that Sheppard's attacks had damaged IT's ability to raise new capital.

Sheppard hit back with a flurry of hooks and jabs that had Bryham and McKee Wright on the back foot.

But Sheppard's counter-attack was short-lived; the numbers were firmly stacked against him. On the substantive motions - the ones relating to the sale of Bryham and McKee Wright's three companies to IT - proxies were 46 million to 0.5 million in favour of the board.

The overall impression was that Bryham and McKee Wright have lost their enthusiasm for IT Capital.

But the two entrepreneurs are going to stick with the company. They announced yesterday that the original deal would be revamped, IT would no longer purchase Datasquirt from them and only $2 million of new equity, instead of $3.7 million, would be raised.

This will give IT Capital enough funds to survive 12 months, but it will probably require another shareholders meeting to approve the revised deal. Sheppard and other dissenting shareholders will have another chance to express their dissatisfaction, but the harsh reality is that the new proposal is IT Capital's last chance of survival.

Auckland Energy Consumer Trust

The inaugural annual meeting of the Auckland Energy Consumer Trust, which will be held at the Ellerslie Convention Centre at 7pm today, could not be better timed. The trust is responsible for Vector, Auckland's electricity network operator, and the trustees are elected.

They should be asked a number of questions this evening: Is Vector on the shortlist of potential purchasers for UnitedNetworks? If so, who made the decision to bid?

How would the UnitedNetworks acquisition be paid for and what implications does it have for Vector's ownership?

Do the trustees have a plan to privatise Vector and list it on the sharemarket?

What is Vector's dividend policy and what implications does the potential purchase of UnitedNetworks have for Vector's dividend payments?

What role do the trustees play in the appointment of Vector's directors and senior management?

Finzsoft Solutions

The New Capital Market (NCM) has been a damp squib, but a number of companies have shown some promise. One of these is Finzsoft Solutions.

Finzsoft, which develops and sells computer software for finance companies, is the clear market leader in New Zealand. In the March 2002 year the company reported sales of $3.5 million and a net loss of $275,000, after a goodwill write-off of $280,000.

The company receives an ongoing licence fee from finance company customers and receives income from any additional products it can sell to existing clients.

Finzsoft growth prospects depend on its ability to crack the international market. Shareholders were told at last week's meeting that it had been short-listed for a major contract in Australia and it was looking to appoint an agent in the United States.

Shareholders approved the issue of up to $2 million worth of new shares to pay for the company's overseas expansion at an issue price not less than the average end-of-day market price over 20 business days before the issue.

As most companies issue new shares at a discount to the market, this resolution reflects the optimism of the board and small number of shareholders who attended last week's annual meeting.

Compass Communications

Compass Communications, another NCM company, has announced it will not proceed with its key transaction. Under NCM rules, Compass must now return all capital to shareholders.

Compass issued 1.2 million shares to the public at 50c each and 1.6 million to directors at 25c each (chairman John Fernyhough purchased 640,000, Karim Hussona 560,000 and Paul Carter 400,000).

The company has total assets of $950,000 and the public shareholders will receive approximately 45c a share and directors half that amount.

Ironically, this is a much better return than Cabletalk and GDC Communications, two companies in the same business as Compass.

Mr Hussona, Compass chief executive, said that the NCM had been a big disappointment with the Stock Exchange showing little interest in the company until Weldon arrived on the scene.

Implementing the key transaction would have been costly with lawyers, valuers, brokers, public relations companies and printers all putting out their hands for big payments.

The Stock Exchange promised that the costs associated with NCM listings would be low but most companies have found they have been extremely high in relation to their size.

* Disclosure of interest: none.

* Email Brian Gaynor