Feltex investigation unsatisfactory
30 August 2006
Feltex investigation unsatisfactory and inappropriate
Feltex workers and shareholders left devastated by the recent $200 million drop in the company's value deserve more than the unsatisfactory and inappropriate Securities Commission investigation that was recently completed, Green Party Economic Development Spokesperson Sue Bradford says.
The Securities Commission has conducted an investigation into Feltex Carpets Limited's 2004 Initial Public Offering (IPO) and concluded that the Prospectus was not misleading about the projected profits and risks facing the company, despite the fact that two years after the share float the company has collapsed in spectacular fashion.
"The Securities Commission decision to take no further action seems bizarre, particularly in light of the Commission's own vision statement, which purports to want to ensure that 'investors can have confidence in New Zealand's securities markets so that the markets increasingly attract investment'. Surely the wiping of $200 million off the value of one company in such a short time completely undermines this goal.
"Furthermore, it is concerning that the Securities Commission was the body to conduct this investigation, as it is by no means neutral in the whole sorry affair.
"In 1997, Credit Suisse First Boston Asian Merchant Partners purchased Feltex's shares for $19.5 million, split these into 120 million shares, and floated them in the IPO at between $1.70 and $1.95 a share in 2004, walking away with a cool $200 million profit. The Securities Commission gave Credit Suisse First Boston nine exemptions under the Securities Act for information not included in the flawed IPO Prospectus.
"Given this involvement, it seems highly inappropriate that the Securities Commission should have been the body to investigate the IPO, as its ability to fairly investigate its own actions must be in question.
"Sadly, it is Feltex workers, Feltex shareholders and the regions and communities where Feltex operates that are the biggest losers following this extraordinary expropriation of wealth.
"It is not the first time that Feltex has been pillaged. It was raided by Equiticorp in the 1980s and almost collapsed at the same time Equiticorp did. The head of Equiticorp, Allan Hawkins, was eventually convicted and jailed for fraud. It is a tribute to the workers and local management of Feltex that the company still remains a profitable carpet manufacturer.
"I hope that Feltex will be able to conclude an agreement with an investor that keeps the company in kiwi hands, employing kiwi workers," Ms Bradford says.