Andrew Barclay, managing director of Goldman Sachs NZ. Photo/Michael Craig
Foggy Air NZ rights issue
The New Zealand Shareholders’ Association (NZSA) is concerned about the time given to investors to accept Air New Zealand’s fundraising, although it considers the $1.2 billion
offer to be fair.
Rights trading got off to a volatile start on Monday. The rights and principal shares did not adjust to their theoretical prices, reflecting general confusion around the offer.
NZSA chief executive Oliver Mander said investors – many of whom are individual or “retail” shareholders – should have had more time to digest the details of the offer.
“We are concerned,” Mander told Stock Takes.
“It is already a complex offer and we are concerned about the confusion surrounding it for professional organizations and retail investors alike.
“The main thing we’re focusing on now is really imploring investors to make sure they understand the offer and its implications before they trade anything, really.”
Mander said he was puzzled why Air NZ advisers had structured the offer the way it was.
“We actually appreciate that the offer is a waiver rights offer – it’s very fair to existing retail investors and we think that’s a good thing.
“But certainly, the way the rights issue is structured – with an applicable right for buying two shares – that simple math actually threw quite a few people off.”
The offering deviates from normal rights issues, in which investors expect a right to buy a share.
The offer led to an NZX error – which was corrected – on Monday morning when the rights were opened for trading.
The period between the announcement of an offer and the start of rights trading is generally five days. But in Air NZ’s case, it was two because it got a waiver from the stock exchange’s regulatory wing, Regco.
Mander said the association was concerned about the timing of the offering, given its complexity.
“That’s a short enough period of time for investors to make their own assessments.”
However, he said the structure itself was clear.
Sharesies – a popular platform for retail investors – has 100,000 users who own Air New Zealand shares.
Mander said the high level of retail ownership would have meant that more time and more material was needed to make the offer as easily understood as possible for everyone.
“The first priority is to make sure that investors really understand what they are getting into when they buy the shares and the rights.”
Air NZ is a primarily retail-based stock; institutions have not bought the shares of the airline for some time.
Mander said principal shares and rights were trading well above levels one would have expected. “We were concerned that stock prices were actually disconnected from business fundamentals.
“We are concerned about the delay between the announcement and when the stock became ex-rights – when the rights started trading.”
Stock and rights prices are now back close to their notionally adjusted levels.
The capital increase is Air NZ’s recognition that it will face a bumpy ride over the next few years.
It aims to recapitalize its balance sheet and repay the loan it received from the Crown during the Covid crisis.
“This is an important step in refueling for our recovery,” the company said.
Goldman Sachs NZ profits plummet
Investment banking firm Goldman Sachs NZ, whose ultimate parent is Goldman Sachs Group of New York, reported a sharp drop in net profit for 2021 to $5.69 million, according to a filing with the NZ Companies Office.
That compares to a profit of $13.67 million the previous year.
Goldman Sachs NZ revenue fell to $27.43 million in 2021 from $40.67 million the previous year.
“At the time of the approval of the financial statements, uncertainty remains about the impact of Covid-19 on the short-term economic outlook, even with the ongoing rollout of the vaccination program,” the directors said in the statement. case.
“The company has been monitoring the impact of Covid-19 on its financial instruments, taking into account several factors, including but not limited to performance indicators, industry events and macroeconomic indicators” , they said.
“The extent of the impact of Covid-19 on the operational and financial performance of the business will depend on future developments, including the duration and continued spread of the outbreak.”
Pacific Rim Down
Shares of cancer diagnostics company Pacific Edge (PEB) have fallen significantly since its $80 million capital raise and listing on the ASX last September.
The stock is now trading around one dollar, having peaked at $1.56 just before the capital raise.
After the recent “stock price compression”, Jarden analyst Christian Bell reassessed PEB’s investment case.
“When PEB raised capital last year, there was a pivot that created some uncertainty as it recognized the need for a more resource-based strategy.
“Following this, PEB has the cash to support the additional resources needed as it seeks to capitalize on its first-mover advantage to deliver a bladder cancer biomarker test that offers superior clinical utility.
To date, volume has been weaker than expected following headline events (Kaiser and Medicare user enrollment) and Covid has likely been a major drag on momentum.
“That being said, we see sales execution as key moving forward, and PEB has a new Managing Director (Dr. Peter Meintjes) to lead commercialization.”
Jarden reduced his target price for Pacific Edge to $1.10 from his previous target of $1.40. The stock is currently trading around 99c.
Reporting season is approaching
Reporting season is looming for these stocks with March 31 balance sheet dates.
Once again, Covid-19, inflation, rising interest rates and now Russia’s invasion of Ukraine look likely to present challenges for many.
“We are watching like hawks to see what this means for some of the earnings confessions,” said Harbor Asset Management portfolio manager Shane Solly.
“It will be another very difficult time for companies to provide clarity,” he said.
Business appeared to have traveled quite well through January and February, Solly said.
“But now we are in a difficult period again.”