Wednesday June 26 was a watershed day for the Stock Exchange.
At 12.30pm the Market Surveillance Panel announced it had advised Fletcher Challenge Forests that the company would have to provide shareholders with information on several items relating to South East Asia Wood (Seawi) and Xylem Investment.
The panel also revealed it
would not be granting waivers in relation to the Fletcher Forests/Seawi/Rubicon transaction.
This was an unprecedented public announcement and the panel also correctly identified Seawi, not Citic, as the principal participant in the proposed deal.
The panel has always been a difficult organisation to deal with and has granted far too many waivers.
Numerous attempts have been made to change the culture of the organisation but it quickly returns to its old uncommunicative ways.
The panel is extremely lax at replying to correspondence, does not publish all its decisions and shareholders are left out of the decision-making process.
The panel has also granted some extraordinary waivers, including an exemption for Macraes Mining to commission an independent appraisal report under Stock Exchange rules when it was proposing to merge with, or be effectively taken over by, GRD.
In theory, the panel is completely separate from the Stock Exchange but Appendix 3 of the Listing Rules provides for some interaction. Section 6 of the appendix allows the NZSE chief executive to attend proceedings of the panel and have full speaking rights but no vote.
The panel's announcement on Fletcher Forests was clearly influenced by Mark Weldon, the NZSE's new chief executive.
All sharemarket participants, with the possible exception of Rubicon, will welcome this development.
Rubicon
Rubicon is the early front-runner for the spin-doctor of the year award.
Chairman Michael Andrews wrote in the recently released annual report that the company had more than doubled the pre-listing share price of 30c and outperformed both the New Zealand and Australian Stock Exchange share indices in the process.
When Andrews, who was then chief executive of Fletcher Challenge, announced the group's separation in October 2000, he said Fletcher Energy shareholders would receive one Rubicon share for every Energy share and the Rubicon shares were valued at approximately $1.20 each.
When the official separation documents were released, Rubicon shares were valued at 88c each, the company's net asset value (NAV).
Yet the annual report has several graphs, based on pre-listing grey market trades at 30c-35c, showing that Rubicon has substantially outperformed the NZSE-40 index. How can Andrews and chief executive Luke Moriarty make these ridiculous claims when the shares were issued at 88c each and are now trading at 65c?
In another graph the company tries to show that Rubicon and Fletcher Forests share prices are closely correlated but the starting share price on this graph is well above the 30c used in other graphs.
In other words, Rubicon has selectively chosen starting share prices that best suit its particular argument.
The company has a net asset value of 82c based on the current market price of Fletcher Forests and Genesis Research & Development shares and an NAV of 106c based on the proposed exit from Fletcher Forests at an assessed value of 37c a share.
Rubicon shares are trading at a 38 per cent discount to projected NAV because investors are either not convinced the Fletcher Forests deal will go through or they don't expect the company will realise full value for the forests it will receive as part of the transaction.
Shareholders may also have doubts about Rubicon's ability to develop a profitable long-term business strategy.
ASX Listings
The delisting of many New Zealand companies from the Australian Stock Exchange on Monday will not have a big impact if Evergreen Forests is anything to go by.
Since the beginning of the year only 120,750 Evergreen shares have been traded on the ASX at prices ranging from 40Ac (46c) to 46.5Ac (53c).
Last week, the company was able to buy back 10,250 shares on the ASX for only 46Ac.
As shares were trading between 61c and 65c on the New Zealand Stock Exchange at the time, it makes one wonder if anyone, including brokers and arbitrageurs, were paying attention to small New Zealand companies listed on the ASX.
eVentures
EVentures' annual meeting was a tame event with only 20 shareholders in attendance. The only major points of discussion were the rationale behind the liquidation decision and the likely payout to shareholders.
Chairman Craig Heatley said the company would have to employ a chief executive and incur costs of at least $1 million a year if it became a technology based investment company and investors would immediately value the shares at a discount to NAV.
Stephen Tindall said he felt comfortable investing in technology on his own behalf but had decided that the listed investment company model was less attractive.
As at December 31 the company had $31.3 million or 34.8c a share in the bank. It had total liabilities of $0.5 million and rent commitments of $435,000 per annum through to 2007. But eVentures is also earning interest on the cash and this should cover its outgoings.
Negotiating an exit from the rental agreement, which is with Kiwi Income Property Trust, will have a big influence on the upcoming payout. The space is 80 per cent sublet, leaving the company with an uncovered commitment of $87,000 per year.
Heatley estimates the payout will be 33c a share and some money might have to be kept in the kitty to meet the lease commitments. But if he can strike a favourable deal with Kiwi then shareholders can expect to receive closer to 35c a share.
Certified Organics
Dr Ray Thomson, chairman of Certified Organics, was in a particularly feisty mood at Friday's annual meeting.
He slammed the Stock Exchange for taking so long to approve the notice of meeting. Unacceptable delays at the exchange resulted in a large number of companies holding their annual meeting on Friday, the last day that December balance date companies could hold their meeting under the Companies Act 1993.
Thomson then had to deal with a persistent shareholder who queried the company's business strategy. The shareholder argued that the company was trying to walk before it could crawl and producing a map of the world's potential markets was misguided when it had sales of only $71,000 in the December 2001 year.
Shareholders wanted to hush him but he had a valid point. Many of our less successful companies talk about global prospects but the more successful ones, The Warehouse being one, focus on New Zealand and move overseas only when they have cracked the home market.
Shareholders approved the issue of one billion new shares and Thomson told the meeting that he expected the company to report a net operating loss of $1.6 million for the year December 2002.
* Disclosure of interest: Brian Gaynor is an eVentures and Fletcher Forests shareholder.
* bgaynor@xtra.co.nz
Wednesday June 26 was a watershed day for the Stock Exchange.
At 12.30pm the Market Surveillance Panel announced it had advised Fletcher Challenge Forests that the company would have to provide shareholders with information on several items relating to South East Asia Wood (Seawi) and Xylem Investment.
The panel also revealed it
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