by Paul McBeth
Concerns are being expressed about the rights of small investors, after a Court of Appeal decision on the roll-up of several property syndicates into one company.
A group of dissenting investors had been challenging a proposal put forward by Waltus and asking for a buy-out, first in the High Court and then the Court of Appeal, before finally conceding defeat late last year. The Court of Appeal issued reasons for its dismissal of their case shortly before Christmas, the guts of it being that imposing a buy-out wouldn't be fair on the majority and it was too late to dismiss Waltus' merger application as it had largely gone ahead.
Financial adviser Murray Weatherston, who led the dissenting group, said yesterday that the Court of Appeal's decision was "basically emasculating" the Companies Act. He was also hot about the Court of Appeal's comments that it would be unfair to the majority of investors to direct a buy-out for the dissenters, given it wasn't an option originally put to them.
"The interesting part of it is, at what point in time do minorities get a chance?" Weatherston said.
"It seems that it's while the ex-parte application is being made... but that's nonsense because we didn't know they were making it."
The option for investors who wanted out was to sell their securities via the Stock Exchange's unlisted facility, but prices have so far been as low as 54c which is almost half the initial NTA of around $1. However, Waltus director Shayne Hodge has pointed out that it's still early days to make judgements on price levels or liquidity, given that the merger happened shortly before the holiday break.
Weatherston himself has been snapping up the odd bargain at 72c, 62c and now 54c, saying that's because the dividend yield is "very attractive".
Meanwhile, Wellington lawyer Graeme Reeves, a former NZ Post director and Company's Act specialist, said the court decisions on Waltus contained some important issues for small investors.
"If you want to encourage people into investment, this seems hardly likely to do so. It shows that the small punter is basically just a feather on the breeze."
Reeves said that the test the Court of Appeal judges relied on was applicable under the old Companies Act of 1955 and considered the actions of an "honest and intelligent man of business".
"However, people investing in Waltus (syndicates) weren't in that category. Most of them were unsophisticated Mom and Pop investors looking for a good yield and certainty. They have ended up with neither."