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Fletcher Challenge Forests insider trading inquiry

Fletcher Challenge Forests Limited – insider trading inquiry

The Securities Commission inquired into trading in the shares of Fletcher Challenge Forests Limited (Fletcher Forests) and Rubicon Limited (Rubicon) in January this year.

On 15 January Fletcher Forests announced that it had agreed to sell cutting rights for US$65m. After the sale Fletcher Forests would make a capital return to shareholders of NZ$140m, that is, 25 cents per share.

The matter of trading in Fletcher Forests shares and also Rubicon (which has a substantial shareholding in Fletcher Forests) before the announcement was referred to the Commission by the New Zealand Stock Exchange (NZSE).

The inquiry considered whether any insider of Fletcher Forests, who had inside information about the sale of cutting rights and capital return, may have traded in the relevant shares, or may have tipped another person, before the announcement on 15 January.

The Commission reviewed trading and identified buyers of significant amounts of the relevant shares before the announcement in particular those who traded on 14 January, the day before the announcement. Three parties bought 72.3% of the ordinary shares of Fletcher Forests traded on this day.

The Commission sought and received explanations of the motives behind these trades. The Commission is satisfied with these explanations.

Fletcher Forests gave us names of people who knew about the sale of cutting rights and proposed capital return before the announcement ( insiders). There does not appear to be any connection between any insiders and any parties buying significant amounts of the relevant shares during the review period.

The NZSE found that Fletcher Forests met its continuous disclosure obligations with regard to the timing of the announcement of 15 January. Negotiations on the sale of cutting rights were not completed until the evening of 14 January i.e. following the share trading activity that day.

The Commission’s inquiry is complete.

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