Securities Commission slams Wakefield's IPO

By NZPA

Wednesday 7th August 2002

Listed healthcare provider Wakefield Hospital Ltd misled investors in its initial public offer document last year, the Securities Commission says.

In a report mailed to shareholders today, the commission said it found possible breaches of securities law in the way Wakefield managed its IPO, and is calling on shareholders to consider whether any action should be taken.

Problems with Wakefield's offer document and prospectus include:

* the offer document failed to adequately describe the risks faced by Wakefield relating to the subcontracting of publicly funded cardiac surgery;

* prospective financial information was misleading because it failed to state that it was based on an assumption that Wakefield would receive significant revenue from cardiac surgery in 2001/2002;

* prospective financial information was misleading as it was presented as a forecast;

* the directors of Wakefield failed to undertake adequate financial due diligence to ensure investors were properly informed of the risks involved in publicly funded surgery.

Wakefield listed on September 6 last year at $2.50 but its share price has crumbled since then after the hospital operator lost its lucrative cardiac surgery contracts. The stock last traded yesterday at $1.42 against a year low of $1.15 and a high of $1.60.

In June Wakefield recorded a 60 percent drop in its unaudited net after tax profit to $683,000 in the full year ending March 31 , driven by the lost contracts.

"This review shows how important it is to clearly identify the investment risks in offer documents," commission chairman Jane Diplock said today.

"Proper disclosure is crucial to building investor confidence in our securities market.

"When inviting investment from the public, rigorous due diligence must be applied to the risks associated with the investment and these risks should be fully disclosed."

The report has also been filed to the Companies Office and either they, or shareholders, could pursue the issue through the courts, Ms Diplock said.

Wakefield today defended its actions, saying the directors acted in accordance with honestly held beliefs.

"We believed referrals for publicly funded cardiac surgery would resume, based on the demonstrated ongoing need for cardiac surgery in the Wellington region, the high priority accorded it by the District Health Board and Government, the District Health Board's ongoing capacity problems and our position as the Wellington region's only provider of such surgery other than Wellington Public Hospital," Wakefield chairman John Calder said.

The company expected to resume publicly funded surgery in future, he added.

"Pressure on cardiac surgery waiting lists continues to build and the Capital and Coast District Health Board has not been able to meet either its own or the Government's cardiac surgery waiting time limits. Given this situation, we continue to believe that Wakefield Hospital is likely to resume publicly funded cardiac surgery."

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