Energy Mad censured, fined by Disciplinary Tribunal for not disclosing profit warning soon enough
Energy Mad [NZX: MAD], a maker of energy efficient lightbulbs which has failed to meet prospectus forecasts, was censured by the NZ Markets Disciplinary Tribunal and fined $30,000 for breaching listing rules by not disclosing a profit warning soon enough.
Energy Mad, which listed in October 2011, knew on December 2011 that it wouldn't achieve $1.5 million of its $3.5 million 2012 prospectus forecast for earnings before interest, tax, depreciation and amortisation because of production and dispatch delays at its Chinese factory although it believed it would be able to pursue alternative revenue streams to make up the shortfall, according to a statement from the Tribunal.
The company didn't disclose the news to the market until Jan. 23, 2012, when its shares fell 21 percent.
"The alternative measures were not guaranteed, resulting in at least a reasonable risk as to whether MAD could deliver its EBITDA forecast from its IPO prospectus," according to the statement. "NZX Regulation considers that on 20 December 2011, through its directors and executive officers, MAD was in possession of material information that should have been disclosed to the market immediately."
Some $82,180 of the company's shares were traded between Dec. 20, 2011, when the disclosure obligation arose and Jan. 23, 2012, when the disclosure was made, according to the statement.
"It is vitally important that all issuers constantly assess their financial performance against any announced financial projections, forecasts or expectations and keep the market fully informed of any matters which may be material to their progress in achieving them," the Tribunal said. "Timely disclosure of market sensitive information is essential to maintaining the integrity of the market."
The Tribunal considered mitigating factors, including that Energy Mad was a new listing, had appointed an experienced company secretary and legal advisers, considered its continuous disclosure obligations, relied on expert advice when deciding not to make an earlier announcement and it wasn't a deliberate breach.
The Tribunal said aggravating factors included that the company waited a month for meetings in Jan. 20 and 22 to consider additional information, although it recognised the delay was compounded by the Christmas period, and noted that the announcement had an immediate market impact.
"Energy Mad now accepts the NZX view that the production and dispatch delays of ecobulb downlights should have been announced on 20 December 2011," chairman Rick Ramsay said in a statement. "Energy Mad has always taken its disclosure obligations seriously, and considers disclosure issues as an agenda item at every board meeting."
The Tribunal approved a settlement agreement between NZX and Energy Mad which included public censure, and for the company to pay a fine and costs.
Shares in Energy Mad last traded at 29 cents, and have shed 38 percent this year, making it the sixth-worst performing stock on the New Zealand exchange.