DNZ head urges regulator to stamp out low-ball offers

DNZ Property Fund chairman Tim Storey Photo / Brett Phibbs.

The Securities Commission needs to move quickly to stamp out the growing number of dubious deals offering investors a fraction of a share's value, says the chair of newly listed DNZ Property Fund.

But the regulator says that's difficult to do under the current legislative framework.

This year alone the Securities Commission has issued seven warnings about unsolicited offers to investors in various companies, including DNZ Property Fund.

DNZ Property Fund chairman Tim Storey says more needs to be done to educate vulnerable investors, some of whom have been taken in by these offers.

"These kinds of offers are designed to take advantage of unsophisticated and vulnerable investors.

"It is of considerable concern that there is nothing that can be done to stop this type of unethical and predatory activity."

Bernard Whimp, a partner in Carrington Securities, has purchased 2.2 million shares through a low-ball offer to investors in DNZ Property Fund Limited.

Whimp bought the shares at just 60c per share. The market value of those shares today is $1.03c.

He has made similar offers to investors in South Canterbury Finance and Strategic Finance.

Whimp was banned from being a company director for four years in 2006, but has been able to skirt the ban by structuring his offers under a limited partnership.

Storey said the Securities Commission had indicated there was nothing they could do under the current framework, but said that wasn't good enough.

"We don't think it's a satisfactory position where a shareholder can lose value like that, hence our comments."

Securities Commission director of primary markets Sue Brown said the commission had not received any official correspondence from DNZ regarding the Carrington offer.

"We will naturally review any information we do receive from DNZ carefully and consider appropriate courses of action," she said.

Under New Zealand law it is not illegal to offer to buy securities below their value, although these offers must not be misleading or deceptive.

The term "misleading or deceptive" is difficult to interpret and Whimp's offers appeared to be above board.

Storey said New Zealand needed to take Australia's lead and make it compulsory for those who made unsolicited offers to set out the market value of the shares on the day the offer is made.

"If someone offers you cash for shares and you don't really understand the value of the shares, then it's attractive," he said.

"If people had seen that (the market value of their shares), then I think they would have been less inclined to take up the offer," he said of the DNZ offer.

Under Australian law investors are given a minimum of one month in which to accept any offer.

Brown said this gave investors time to take appropriate advice about, and information to enable them to make an information decision about the offer.

The Ministry of Economic Development has published a discussion paper seeking views on the protection that should be offered to security holders in similar circumstances.

The Securities Commission said it was working with the Ministry to develop an appropriate solution.

"In the meantime, the Securities Commission will soon be publishing further guidance for investors who receive unsolicited offers," Brown said.

DNZ Property Fund, which owns one of this country's largest diversified investment property portfolio's listed on the NZX last week, with about 8200 shareholders - many of them elderly.