NZX on Plus SMS case after big fall

A dramatic fall in Plus SMS shares - amid talk that a key investor had cut his shareholding in the text-messaging company - has sparked a "please explain" notice from the NZX.

The exchange yesterday disclosed it had asked Plus SMS to clarify why the shares over the last two weeks had fallen from a high of 70c to as low as 40c. "This is a decrease of 30c per share - 42.9 per cent - and a decrease of 12c per share - 23.1 per cent - since market close on Monday, May 22, 2006," the exchange said. It asked whether Plus SMS was in breach of the continuous disclosure rules.

Plus SMS, through its lawyers Jones Young, gave a brief, and less-than illuminating reply: "We are instructed by the board of PLS to confirm on their behalf that PLS continues to comply with NZAX [continuous disclosure rules]"

Plus SMS did not comment further.

Plus SMS shares yesterday closed up 6c at 46c. Investor confidence in the stock has been hit by speculation on why high-profile investor Craig Heatley had cut his stake.

Some fear that this could be a sign that Heatley has lost confidence in the company.

Since May 5, Heatley has sold 650,000 shares in the company, reducing his holding to 1.3 million shares and cutting his ranking from the 15th- largest shareholder to the 23rd. He now holds just over 0.61 per cent of the company.

He also did not respond to calls.

The shares have also suffered from an impending placement of $5 million of stock to Jersey-based investment firm Hewon Capital.

Earlier this month, subject to shareholder approval, Hewon agreed to buy 10 million shares at 50c apiece. As part of this agreement, it will also be issued with warrants to another 70 million shares at 50c.

These warrants can be exercised between 10 and 20 months, with the first tranche becoming available if Plus SMS achieves its ambition to list on the London Stock Exchange's AIM small companies market. Shareholders get to vote on the placement sometime before the end of June.

Plus SMS joined the NZAX market last July through a backdoor listing using the shell of failed retailer Retail-X. Its $156 million market value is regarded with some scepticism among professional investors, especially since it recorded no revenue and made a $4.8 million loss in the last financial year.