Fletcher Forests share trading to be investigated

By NZPA

Wednesday 15th January 2003

The Securities Commission said today it will investigate trading in Fletcher Forests shares.

"The Securities Commission has confirmed that they will be looking at whether there may be any evidence of insider trading ahead of the company's announcement," the Stock Exchange said in a statement.

Brokers said there was more than a whiff of insider trading surrounding Fletcher Challenge Forests's announcement today of a sale of cutting rights and a 25 cents per share capital return.

Fletcher Forest shares rose sharply yesterday ahead of today's announcement of the $US65 million ($NZ122 million) sale and $140 million capital return.

The head shares closed 7 cents higher at $1.08 yesterday and at one stage rose as high as $1.10. Today, they rose further to $1.19 before easing back to $1.16.

The exchange said that it would be conducting a separate inquiry into all aspects of trading in the stock which occurred prior to the announcement "to ensure that all parties involved have complied with the new NZSE conduct rules."

The exchange said it would act swiftly to resolve the matter.

Fletcher Forests company secretary Paul Gillard said his company "took insider trading very seriously" but blamed the sudden rise in price yesterday trading on positive analysts' reports on the industry's more positive outlook.

He said two reports had been published, one by brokerage JB Were and one by Macquarie Equities.

However, Macquarie said it was not aware of publishing such a report.

An exchange spokeswoman said that its new conduct rules included the new continuous disclosure requirements which were a key part of the new rules.

One broker, who did not wish to be identified, noted that there was "very, very aggressive" buying in Fletcher Forests by three brokers yesterday which he described as "abnormal".

He said he had some very angry clients who sold yesterday.

The buying was initiated by JB Were which bought everything on offer at $1.03, two cents above Monday's close. Its bidding was soon trumped by Salomon Smith Barney which came in at $1.05 and then Forsyth Barr Frater Williams which bid at $1.08.

"Within the first 45 minutes of trading, the share price moved 8 cents -- that's a pretty impressive movement for a stock like that. There's definitely a smell there."

He said whenever there was a transaction like this, which involved selling the cutting rights to United States forestry investor, UBS Timber Investors, there were lawyers, brokers and consultants involved and information could leak without the deal makers being inside traders.

The broker said two of Fletcher's major owners, Rubicon with a 17.6 percent stake, and Guinness Peat Group, were unaware of the deal before its announcement.

The commission was unable to say how long its investigation would take.

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