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Diligent Board Member Services founder Brian Henry admitted his failure to be open about his past and that of his convicted fraudster brother, Gerald, rained on his parade at the company's public listing yesterday.
Given Diligent's $24 million IPO was several times oversubscribed, the New York-based software firm made a disappointing debut on the NZX yesterday, listing on its issue price of $1 and dropping to 95c.
After media reports last week, Diligent had to issue a statement distancing itself from Gerald Henry, saying he had no interest in the company and was not employed by it.
Sources close to promoters McDouall Stuart estimated media report wiped over $10 million off the company's capitalisation which opened at $140 million.
Gerald Henry floated Energycorp in the 1980s and after it crashed was bankrupted in 1989, owing $55 million. He fled to the United States where he was jailed for four years in 1996 after he was found guilty of fraud charges.
A Sunday newspaper revealed Brian Henry was also a director of EnergyCorp, which was notorious for its expensive cars for executives, a corporate jet and subsidiary companies that failed to deliver.
Diligent's promoters and directors knew of Brian Henry's connection with Energycorp, but decided not to disclose it.
Left out of the loop was NZX chief executive Mark Weldon, who invested much time and effort wooing the New York firm to list here.
Henry, who owns 20 per cent of Diligent, said he got "a good telling off" from NZX and Weldon.
He told reporters at a function at NZX to mark the listing he had been been in touch with other shareholders "and they agreed this should have come out".
Henry said he made a myriad silly assumptions. "I thought everybody knew about this and they didn't. It's unfortunate."
He is hoping the story will return to Diligent. The company was about to release licencing figures showing sales in 2007 had been in line with the prospectus assumptions.
To back their prospectus projections, founding shareholders have agreed to forfeit up to 20 per cent of their shareholding if licence fee projections are not met.
The product is a web-based service which provides access to board papers via the internet.
- NZPA
