Nuplex shares plunge 45pc on ASX

Nuplex shares listed on the Australian stock exchange plunged more than 45 per cent on the first day of its Australian rights trading but analysts say they should be even lower.

Shares in the New Zealand plastics and resins maker fell A34c (41c) to close on A39c yesterday as Nuplex entered a two-week trading period to allow shareholders to either buy or sell their rights.

The seven for one rights issue won't start trading in New Zealand until next Wednesday.

On the NZX Nuplex shares have continued to rise over the past two days and yesterday closed up 15c at $1.03 - just 4c below the price Nuplex was trading at before it revealed plans for its rights issue.

But analysts say on the current exchange rate and the trading price in New Zealand Australians could be buying the shares in New Zealand for less when the trading opens here.

At yesterday's price the New Zealand shares would be expected to trade around 34c during next week's rights issue or the equivalent of just A27c.

Market commentator Arthur Lim said the higher price showed the confusion that had arisen as a consequence of the different rights trading periods in New Zealand and Australia.

He said the current share price in Australia equated to Australians paying 50c when they could wait until the New Zealand rights trading opened to pay just 34c based on yesterday's share price.

Lim said he expected the numbers to equalise once NZ trading started.

He said some short sellers in Australia might also have been caught out. Short sellers make money by taking bets that the share price will fall rather that rise.

The practice has been banned for banking stocks on the Australian stock exchange as it was linked to the collapse of some of the US banking stocks but is still able to be used for other companies.

Lim said many Australian short sellers had made a fortune from taking punts on the likes of Babcock & Brown, ABC Learning Centres and Allco before their share prices had collapsed and might have seen a chance to do the same with Nuplex.

Nuplex has been forced to go ahead with the capital raising after breaching a senior debt cover ratio as a result of falling demand and the kiwi dollar's fall.

It reached a new deal with its bankers on the proviso it would raise $110 million but had to increase that after institutional feedback during the book-building process revealed fears it would have to come back for more money in less than a year.

The $132.8 million capital raising, to be used to reduce Nuplex's debt level, is seen as having a good chance of success as it is fully underwritten by First NZ Capital.

But the company is also under investigation by the NZX and the Securities Commission for a possible failure to meet disclosure requirements over its breach in the banking covenants.