KEY POINTS:
The share price of PGG Wrightson continues to take a beating from investors as the half-year result for the rural services company draws closer.
Shares fell 16c yesterday to close at 82c. So far this week the company's share price has slumped by 36.9 per cent, wiping $140.4
million off market capitalisation.
Forsyth Barr analyst John Cairns said investor reaction was following on from the situation involving Fisher & Paykel Appliances and Nuplex and concerns over debt facilities.
"I guess there's the huge issue of governance of that company with the debacle of the Silver Fern Farms [failed partnership deal].
"How could they possibly get themselves in that position, entering into an unconditional contract without securing your funding lines?"
A lower share price had implications for raising capital, Cairns said.
"Prices keep going down and down and down - there's obviously no appetite for the stock therefore the ability to raise fresh capital is curtailed."
Another analyst, who asked not to be named, said that as next Thursday's half-year result drew closer people were getting nervous about risks, including to the earnings outlook for the second half of the year, the balance sheet being somewhat over-geared and what was until this week an unquantifiable liability from the failed partnership deal with Silver Fern Farms.
"Obviously the way the Silver Fern Farms guys reacted to the [compensation] offer of $10 million made people think that it could be significantly more than that they end up being stung for."
PGG Wrightson last year agreed to buy half of meat processor co-operative Silver Fern Farms for $220 million but missed the first instalment in September because it was unable to finalise bank credits.
Silver Fern Farms terminated the agreement in November and on Tuesday, PGG Wrightson said it would provide $10 million against the meat processor's claim and wanted a settlement based on delivering benefits that would have been achieved by the original deal.
In reply Silver Fern Farms said PGG Wrightson was being antagonistic, $10 million was totally unacceptable and the situation could end up in litigation.
PGG Wrightson spokesman Barry Akers said there was a lot of negative sentiment in the market and some of this had attached to PGG Wrightson for reasons that were well canvassed.