Forum Archive Index - October 2000

[Mike Hudson <MHudson@placemakers.co.nz>]

An anonymous poster wrote

"Imho,Fletchers announced the sale before the commission announced their
decision because they were trying to put pressure on the commission 
.As a 3rd generation New Zealander, I am glad the commission decided against
a monopoly
 I am sure that some of the Fletcher management have been involved in
insider trading. Their trading for the last month should be investigated,
and they should be held accountable
is it a full moon as well?"

I certainly could not be considered an apologist for the Fletcher management
but I could almost guarantee that has been no insider trading. They have
always been paranoid about monitoring senior executives share transactions
and there are periods, prior to the release of results for example, when
there is an embargo on dealings. I am sure that the whole period of the
restructuring would be covered by the embargo. When a certain level of
seniority has been reached all share trades have to be reported to the
Board, witness Mr Hoggard's slip up: he broke the rules and paid the price.

 I subscribe to the cock up theory of history rather than the conspiracy
theory. The price of FFS dived steeply on I think is was Monday suggesting
that maybe somebody had got wind of the rights issue. If the leak had been
about the whole deal it follows that FEG would have jumped up at the same
time but it didn't suggesting that if there was a leak it came from someone
who knew about the FFS deal but not the FEG - not likely IMO. I think that
the original plan was to release the details of the reorganisation today
after the Commerce Commission approval but that the activity in FFS shares
spooked the board into an early announcement. What they didn't count on was
the decision from the Commission, hence the cock up.

I agree with Malcolm and the anonymous person. I am quite happy for FEG to
continue as a stand alone company, it has first class assets, good
management strong cashflows and oil is a very good business to be in at the
moment. I did intend to sell today (I was contemplating selling on Wednesday
but my broker thought I would get a bit more after the Commerce Commission
approval - Greed!) because the deal having being struck and the opportunity
to continue to participate the future growth had effectively gone. So I will
hold on and not worry too much about it

What I can't understand is the psyche of some investors. We know that Shell
who are no mugs when it comes valuing  oil and gas assets are prepared to
pay $8.40 a share. Ok so there may be some synergies which Shell can extract
which may make FEG worth more to them than anybody else so lets cut that
down to $7.50  We know that there is some value in Capstone and Rubicon,
$2.92 according to FCL but lets say $1.50 to be on the safe side. The other
factor is the underwriting risk for the FFS issue but that should not be too
great. A conservative valuation therefore should be $7.50 plus $1.50
totalling $9.00.  
 
Why then would someone dump 22,000 shares at $7.52 when the market opened
this morning? Beats me but I guess that it is  the irrationality of the
market that makes it so interesting

Talking about the moon, the walking group that I belong spent the first 15
minutes this morning moaning about the thousands of dollars we had each lost
on the markets in the last couple of weeks, the state of the economy, the
falling dollar, the Treaty, the District Plan and everything else that is
wrong with the world. Then we reached the top of the hill at dawn and looked
out over Tasman Bay, The moon was huge and full and hanging over snow capped
mountains which were illuminated by the early rays of the eastern sun. The
air was still, the sea was calm and the dawn chorus was in full voice.
Magic. There are more things in life than stock markets. 

Cheers
Mike H 





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