Commission asked to scrutinise Feltex

The Shareholders' Association has asked the Securities Commission to investigate whether Feltex investors were appropriately informed about the troubled carpet-maker's prospects.

"We write to make a formal complaint regarding disclosure by the board of Feltex in its prospectus, issued in respect of its [flotation] last year, and subsequent conduct regarding ongoing disclosure," the association's director of advocacy, Ross Dillon, said in a letter to the commission.

Feltex chairman Tim Saunders declined to comment.

The request follows the carpet-maker's warning on April 1 that full-year profits would fall from a forecast $23.9 million to between $15 million and $16 million. As half of the year had already passed by this stage, the company was effectively cutting its forecast for the second half from $11.8 million to between $2.8 million and $3.8 million.

The warning prompted widespread investor outrage, particularly as the company had said just over a month earlier that projections for the full year remained "achievable".

In his letter, Dillon said it seemed there was a reasonable basis to believe the forecasts could not be met soon after Feltex listed. He wants the commission to investigate this, look for any breaches of securities legislation and the board's obligations under the continuous disclosure regime.

He also asked the commission to examine whether the NZX should also examine the disclosures.

Scepticism over the company's prospects was rife before it floated. The $1.70 float price was at the bottom of the indicative range. Its shares closed steady yesterday at 67c.