Forum Archive Index - May 2002

["Matthew Van Veen" <mattvanveen@hotmail.com>]

Snoopy

I have decided to reeducate myself and am currently a "mature student" doing 
a DIP BUS at AUT. One of my papers is Business Finance and a question in my 
current assignments is "Describe and explain the factors that caused Air New 
Zealands financial crisis in 2001".
Its due in next week. I put info together from the AIR website, treasury, 
news clippings and sharechat archives. I will use the Chart that Phaedrus 
kindly produced for me as an attachment with a basic explanation that you 
have highlighted. The other recent rights issues were in Oct 96 and Oct 
2000. Note though the price was long trending down prior since 1999 prior to 
the purchase of the 2nd 50%. I still however can't measurably pin the blame 
on one thing as there were various factors all beginning with the Aust Govt 
and of perhaps the conflict of interest on the Air NZ board?

I think the story of Air NZ will be a case study for all NZ business 
students for years to come as like ENRON possibly will be in US.

Feel free to offer more opinions - all will be a help. The question only has 
a 1500 word limit.

Matt
>From: "tennyson@caverock.net.nz" <tennyson@caverock.net.nz>
>Reply-To: sharechat@sharechat.co.nz
>To: sharechat@sharechat.co.nz
>Subject: Re: [sharechat] Air NZ Chart
>Date: Wed, 15 May 2002 19:33:22 +0000
>
>Hi Matt,
>
>It was interesting to see the Air New Zealand share price chart again
>and we can thank Phaedrus for it.
>
>However, what do you intend to do with this chart?   I would suggest
>that considering any of those share price figure plot points before
>the capital reconstruction became inevitable late last year is not
>wise.
>
>Now, I know that Phaedrus would say that the chart is only an
>approximation, as it doesn't allow for dividends cash issues and
>whatever else.   However, I would go much further than that.  So much
>capital was introduced into Air New Zealand during the
>government reconstruction that if you attempt to use the chart as
>presented, not only is it inaccurate, it is *dangerously misleading*.
>
>Immediately before and immediately after the capital reconstruction
>the underlying business did not change instantly.  However, instead
>of the AIR shares listed on the stock exchange representing the
>whole company, those same shares were only representing 18% of the
>business.  To account for this, you have to scale down the figures
>before this reconstruction time period accordingly.  What you must do
>is take the closing share price before the reconstruction and scale
>them by 18/100 or 0.18.   Take an example:  The share price closed at
>$1.58 at the end of year 2000.   However, on your graph you will need
>to use the figure $1.58 x 0.18 = 28c.   Only by doing this will you
>be able to glean anything meaningful from this chart.
>
>SNOOPY
>
>
>
>---------------------------------
>Message sent by Snoopy
>e-mail  tennyson@caverock.net.nz
>on Pegasus Mail version 2.55
>----------------------------------
>"You can tell me I'm wrong twice,
>but that still only makes me wrong once."
>
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