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Sky TV warns about low-ball share offer

The scourge of the unsolicited offer returns — and there's a familiar name behind it.

Sat, 23 Apr 2016

Sky TV [NZX: SKT] is warning shareholders about an unsolicited, low-ball offer from an outfit called Zero Commission.

In an NZX filing, Sky says Zero Commission NZ has notified its intention to write to certain Sky shareholders with an unsolicited offer to buy their shares at $4.57 per share.

Sky shares haven't been close to $4.57 since March 10 when they closed $4.55.

The stock has risen steadily since and on Friday closed at $5.17.

According to the Companies Office, Zero Commission has two shareholders, who are also its two directors: Philip Robert Briggs of New Lynn and Roy Richard Jackson of Browns Bay.
Mr Briggs has been previously highlighted in NBR after Zero made low-ball offers to Pumpkin Patch and Tower investors in 2014 and for CDL shares in 2011.
Zero says its offers can be economical for small shareholders who could face a brokerage fee of up to $100. The Financial Markets Authority (FMA) notes on its website that broker fees typically fall in the $30 to $70 range.

Many would consider low-ball share offers immoral and unethical. They prey on unsophisticated or unengaged shareholders.

But the FMA notes the practice is not, in fact, illegal.

However, a tightening up of the rules after a series of unsolicited offers earlier this decade means an unsolicited offer must include a recent market price (it was not immediately clear if Sky's current share price was included in Zero's offer, or would be).

The FMA also advises anyone who does accept a low-ball offer that they have a 10-day "cooling-off" period during which they can change their minds.

And it recommends people consult an independent broker rather than accept an unsolicited offer's claims about trading commission at face value.

The watchdog also warns that unsolicited offers are often timed to coincide with official letters from the company concerned, and at times use letterhead designed to look similar to the company concerned. 

Low-ball offers last hit headlines in 2011 when Bernard Whimp targeted investors at several companies, notably Vector and DNZ Property.

The Securities Commission (now subsumed into the FMA) took Mr Whimp to the High Court, successfully blocking several of his long-settlement offers that did not comply with market rules, and banning companies he was involved in from dealing in or transferring shares in numerous companies. The court ordered Mr Whimp to return shares and banned him from making similar offers.

Mr Whimp made what he called "high ball" offers, or those with a long settlement date.

Mr Whimp – described as a convicted burglar and banned company director who used limited partnerships to make unsolicited offers – took the heat out of the case with his decision to voluntarily "retire", but not before he had pocketed an estimated $2 million from naive investors.

Read the FMA's backgrounder on low-ball offers here. It includes a warning about what Mr Whimp calls "high ball" offers, noting that the entity that makes such an offer might not longer exist when the long-term settlement falls due.

NBR has asked the watchdog for comment on Zero's Sky TV offer.

Tune into NBR Radio’s Sunday Business with Andrew Patterson on Sunday morning, for analysis and feature-length interviews.

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Sky TV warns about low-ball share offer