Forum Archive Index - March 2000

["Ian Andrews" <iandrews@ihug.co.nz>]

A problem I have with DFM is that they mailed me a few months ago recommending AQL as a "strong buy" at about 19c. I now discover, the share price having fallen, & having bought some AQL shares, that DFM has reportedly been selling down its own stake without telling us first.I didn't realise they held a stake, but these days one seems to be expected to pay for daily shareholder lists in every company in which one is invested - if one wished to be completely covered - or since this is obviously impractical - simply take the risk. 

 

There may be a perfectly ethical explanation for the share sales, but I believe the Stock Exchange Association ought to initiate enquiries. DFM makes markets in a lot of the more speculative shares, & its conflicts of interest need to be proven to be not a problem. The market shouldn't have to accept the broker's assurance that there is no problem.

 

This all puts me in mind of a previous unhappy experience when my family trust owned about 1% of a sharemarket minow named NZ Petroleum......

 

2 years ago, DFM, wearing various hats, virtually handed control of NZ Petroleum to Eric Watson, providing Mr Watson a cheap listing vehicle for Blue Star retirement homes. Stuart Cairns told us at the time $1 million of value was the price "negotiated" with Mr Watson for this on behalf of NZ Pet shareholders. In fact, Mr Watson's interests eventually made a paper gain of many millions. Mr Cairns is now Chairman of Blue Star. Did the former NZ Pet shareholders get the best deal possible from the listing potential locked up in their company, which most of them had supported through thick & thin for many years without reward?

 

These shareholders got no joy when the rights issue watered them down. Most of them had their opportunity of any recovery extinguished by a compulsory buyback at the equivalent of about half the current Blue Star (formerly NZ Pet) share price. The remaining shareholders had their potential gain trimmed by the later issue of shares at even less than this buyback price to the Blue Star retirement home owners.

 

An "independent" report commissioned by NZ Pet directors said this was "fair"

  

The mechanism used for the initial transfer of control - a right's issue with terms so severe Mr Watson took about 75%  of the  shares offered as the "underwriter" - was exposed at the time in the media. However, the events which led up to the issue of a Prospectus( to which I responded ) & which said the company's future lay in  oil exploration have not been revealed. It seems the secrecy will continue.     

 

The Securities Commission obtained information at the time about this issue. The Ombudsman office have been trying to obtain it for 16 months for me, but the Commission is refusing to supply any of it because "to do so may prejudice the supply of further information from this source".   The Commission says the "source" of the NZ Petroleum information does not want any of it revealed. Can you help, DFM?