New York-based fund emerges as Rubicon investor with 7.5 percent stake

Tuesday 10th July 2012

Sophrosyne Capital, a New York-based fund manager, has emerged with a 7.5 percent in Rubicon after doubling the size of its investment in the New Zealand forestry biotech firm's recent rights issue.

The privately-held fund manager bought 700,000 shares, or 3.4 percent, for almost $260,000 in March, and subsequently subscribed for an extra 18.7 million shares for some US$3.3 million in this month's rights issue, according to a substantial shareholder notice.

Rubicon raised $21 million in a fully-subscribed one-for-three rights issue to fund plans for its ArborGen and Tenon subsidiaries. "Sophrosyne Capital LLC was pleased to provide growth capital to the Rubicon team," managing member Benjamin Taylor said in an emailed statement. "We're constructive on construction technologies."

The US fund manager is now Rubicon's fifth-biggest investor, behind fellow American investment houses Knott Partners, Third Avenue Management, Sandell Asset Management and Perry Corp.

Collectively the US investors hold almost 80 percent of Rubicon's shares. Sophrosyne had some US$169.5 million under management as at March 31, according to statements filed with the Securities and Exchange Commission in Washington DC.

Its most valuable holdings were in Apple Inc, mobile marketing firm Velti, and business intelligence software company Microstrategy. The fund also held share parcels in circuit maker Tower Semiconductor, internet phone company Vonage Holdings and medical device maker Enteromedics.

According to Nasdaq data, Sophrosyne's sector weighting is tilted to technology stocks, which make up almost 48 percent of its portfolio, and healthcare stocks at 25 percent. Knott Partners' David Knott was elected a director of Rubicon last year after Sandell Asset Management lobbied for greater shareholder representation at the board amid concerns the biotech company was undervalued.

The shares were unchanged at 30 cents in trading today, and have shed 13 percent this year. That values it at about $113.9 million. Rubicon owns 33 percent of the loss-making ArborGen, which is developing genetically modified trees, such as eucalyptus, to withstand extreme frosts or grow at a faster pace.

It also holds 59 percent of New Zealand-listed Tenon, which sells moulded wood products mainly in North America. A planned float of ArborGen in the US last year had to be postponed because of adverse market conditions and Tenon, which reported a US$6 million net loss for the six months ended December 31, has been hit by the US housing market downturn.

Rubicon reported a loss of US$8 million in the latest six-month period. It was created out of a grab-bag of former Fletcher Challenge assets in 2001, which were gradually whittled away to just the Tenon and ArborGen stakes.

BusinessDesk.co.nz

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