New Zealand-based investors are selling out of Diligent Corp before the company is acquired by venture capital firm Insight Venture Partners -- fearing they'll have to pay tax, analysts say.
Under the terms of the agreement, Diligent shareholders will receive $7.39 (US$4.90) in cash per share. The shares will go into a trading halt on Monday after the market closes before a special meeting of stockholders on Wednesday morning. If the sale goes ahead, Diligent will be delisted and money will be paid to shareholders.
In a statement filed to the stock exchange on March 7, Diligent said New Zealand holders of the stock may be liable for tax if the merger proceeds because Diligent is a foreign company for the purposes of the foreign investment fund (FIF) tax rules.
A tax liability will arise if a New Zealand investor applies the FIF rules to their foreign company investments. However, that can be avoided if a New Zealand shareholder sells before the merger is approved.
The New Zealand Shareholders Association drew attention to the potential tax liability for New Zealand shareholders of the NZX-listed, New York-based company.
