Low-ball investor targets Rural Equities

Sir Selwyn Cushing

NBR Rich Listers the Cushing family are calling on the Financial Markets Authority to tighten share register rules after Rural Equities became a low-ball target.

Australia's Stock and Share Trading has made an offer to shareholders of the farming group that is about 29% below their market price.

Stock and Share is offering to buy shares at $2.30 apiece, below the $3.22 they traded at yesterday on the Unlisted platform.

Rural Equities executive chairman David Cushing, son of Sir Selwyn, is frustrated by the repeated offers but says it has been told by the FMA it is legally required to provide its share register. 

"To compel the board of directors to provide the share register to any party without appropriate screening should be reviewed," he says.

Commerce Minister Craig Foss says says regulations to rein in low-ball offers should be in place by the end of the year, while the FMA says the Financial Markets Conduct Bill includes proposed provisions regarding share register requests, which would give FMA and companies grounds to decline certain requests..  

Mr Cushing says Stock and Share picked up 100,000 shares in a previous low offer and sold them immediately for a profit of about 90 cents each.

"To make three written offers within 12 months, all at vast discounts to market price, is pretty unsatisfactory. It's a rather frustrating situation for the directors and shareholders."

Rural Equities, New Zealand’s only publicly traded land ownership company, is 55%-owned by the Cushings’ investment vehicle, H&G.

Stock and Share has recently made offers for certain capital notes issued by Fletcher Building Industries Limited and Tower shares, prompting a warning from the FMA earlier this month.

Stock and Share says it complies

Melbourne-based Stock and Share is owned by John Armour and his firm is represented in New Zealand by Andrew Kennedy of Auckland law firm Prudentia Law.

Mr Kennedy confirmed he represents the Australian firm, which he says is complying with New Zealand's financial regulations.

"The Financial Markets Authority has been in discussion with it and there are requirements that my client is meeting in terms of disclosure and how the offers are vetted," he told BusinessDesk.

The proposal is the third such approach to Rural Equities' shareholders in the past 12 months. Wellington-based investment firm Rangatira's Unlisted shares were also targeted last month with a low-ball offer.

Firms such as Stock and Share take advantage of corporate regulation that allows them to demand a company's shareholder list.

They often target holders of smaller parcels of shares who may not keep track of the price and are attracted to the prospect of quick cash.

The offers are legal and the targeted companies generally respond by pointing out how much of a discount the offer is to recent trading and urging shareholders to get proper financial advice before accepting.

"At the end of the day, the investor is the one that has to make the decision," says David Wallace, Unlisted's market manager.

"These sorts of offers just create confusion and despondency about New Zealand's capital markets and I hope the FMA responds appropriately."

- with reporting by BusinessDesk

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17 Comments & Questions

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I sympathise but you cannot give the Board any discretion in this matter or investor activists will be massively disadvantaged when they require the register for legitimate reasons that may involve replacing the board. Its a tradeoff but protecting the stupid against themselves is always difficult and cannot always be legislated for - particularly when there are other disadvantages.

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The share register can be given out for other purposes but not for low ball offers at deep discounts. If it is provided the recipient should warrant it will not make a low ball offer. That fixes the problem you have identified.

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No it doesn't, because unscrupulous directors can use the legal process over the form of the warranty to severely delay the process. There cannot be any discretion whatsoever here or it won't work.

Furthermore, to claim under a warranty the company must have suffered some 'loss' - and in this case its the investors who have arguably lost.

Finally, who is to say that the 'traded price' on the Unlsted platform is 'fair'? Unlisted is not even a proper exchange, and the continuous disclosure rules don't apply. Moreover, it is incredibly illiquid so the share price at any one time is just a punters guess in any event.

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Rural Equities Investors have been targeted for years by low ball offers from a Hastings based family. What is the difference ?

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Agree - and anyone in Hawkes Bay knows who they are!

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Caveat venditor - seller beware.

If someone offers you money for something for which the value can be ascertained incredibly easily, and you accept that low offer, then it is nobody's fault but your own.

If I offer a car dealer $100 for a $10,000 car and he accepts, he can't go crying to the comcom about my 'lowball' offer, so why is this any different

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Exactly, a fool and his money are easily parted. You can't legislate to stop that or our parliament would need to start sitting 24 hours a day given all the idiots in this country...

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The FMA is totally asleep at the wheel here.
They took a position opposite to the Aussie regulator to allow these predatory offers on the basis that they tell investors the shares have traded higher. What rubbish.
No one reads documents, the FMA know that.

Come on Sue Brown these market predators are taking naive investors money.
Don't be the ambulance at bottom of cliff again. Please

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For FMA and govt response see here: http://bit.ly/UfiDP7

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FMA CEO Sean Hughes will be on Radio Live at 4.45pm today to discuss low ball offers and what FMA is doing about them.

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Great work Tony, keep the pressure on.

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These dreadful low ballers and their awful legal advisers must be stopped. Someone should do something.

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Like don't sell your shares to them?

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Share registers/shareholders are public information for every company in NZ.
So if some one sells their shares based on an offer, without any compulsion, who's problem is that - their own - simple???
You can't legislate against people's own stupidity!!

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Thanks to all the low ballers and their advisers for their contributions to this thread. You are such charitable people as elderly people get ripped off.

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Likewise thanks to all the nanny state wingers who lost money in the finance company crashes and still blame everyone but themselves

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These scum are ruthless predators. Worse than any finco Director. They target people on registers, small holders, old people and people with care home addresses. Low balling scum.
Come on FMA, step up and ban the practice. Aussie did.

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