Forum Archive Index - July 2003

[Dean Phibbs <fibz@xtra.co.nz>]

Hi Snoopy

I'm going to have one more crack at this then I'll give it a bone. 
(before investors leave the site in droves).

Had a look at the RCH website and the size of the shareholdings in their 
last annual report before the rights issue.  It was economic for 
1,245,231 shareholders to ignore the currency conversion which accounts 
for about $350,000 at the rights issue price.  That leaves $1.4 million 
dollars where it would be uneconomic to ignore it.  In some cases very 
uneconomic.  The fact these investors paid a 12% premium for the same 
asset.  Why?  I would guess that they failed to analyse the transaction 
rationally. Agree?

Also managed to get hold of an investment statement for RCH rights 
issue.  In some ways the company is at fault here. All the risks of the 
investment are disclosed by RCH including the risk of your shares 
falling in value (as if we didn't know).  There is no mention of the 
possible risk that they created offering the shares in $US and $NZ, the 
risk of you overpaying for your issue if the $US appreciated (by any 
amount) against the $NZ is not mentioned. Why?  Surely if RCH think that 
investors need to be reminded that their shares can go down in value 
they should have also explained the more complicated possible currency 
risk? no?   Remember here that there is absolutely no risk for RCH 's 
capital raising, they have hedged their $US at 14.5c, the risk is all 
the investors if the currency appreciates at all after the release of 
the investment statement. If this is the case and the investor pays in 
$NZ they lose.  RCH  lose nothing by disclosure it would have cost them 
absolutely nothing to include advice in the original statement, except a 
windfall.  

Now the company (wary) profited by about $160,000 (adjusted) from the 
shareholder (and they were unwary) because the company did not even 
attempt to explain the transaction.  If they unwittingly did it -  bad 
luck I suppose, for the investor.  If they did not explain it and hoped 
that investors might not notice, well.... that is an issue of integrity. 
Sorry Snoopy I beg to differ.

Dean 


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