Trading in Fletcher probed by regulators
NZX and the Financial Markets Authority are investigating potential ‘‘disclosure-based misconduct’’ relating to a report that Wesfarmers was allegedly buying shares in Fletcher Building, which led to a spike in its share price.
The Sydney Morning Herald reported on Friday that Australian giant Wesfarmers had built a stake of between 3 per cent and 4 per cent in the troubled construction company, citing sources close to Wesfarmers.
Fletcher shares rose 14 per cent to a high of $6.66 after the report.
Wesfarmers, which owns the Bunnings and Kmart brands among other businesses, later confirmed it had no shares in Fletcher Building.
Fletcher, which is dual-listed on the Australian and New Zealand stock exchanges, has racked up massive losses on 16 big building projects, including SkyCity’s International Convention Centre and Christchurch’s $300 million Justice Precinct.
Fletcher Building shares were placed in a trading halt on Tuesday, ahead of its announcement that it would raise $750m from existing shareholders to strengthen its balance sheet.
Shareholders will be offered the opportunity to buy one share for every 4.46 shares owned, at $4.80 a share, a 23.4 per cent discount to the closing share price on the NZX on Monday.
NZX spokeswoman Hannah Lynch said the stock exchange operator would also look at trading ahead of Fletcher’s trading halt as part of its ‘‘routine surveillance processes’’ for characteristics of insider trading.
Australian fund manager Ellerston Capital announced on Monday that it owned a 5 per cent stake in Fletcher. The stake gives Ellerston the right to buy about another 8 million soon-to-be issued Fletcher shares at a huge discount.
Ellerston's Australian Share Fund singled out Fletcher Building as one of its "turnaround stories" in its January report to investors.
Ellerston, which manages A$5 billion (NZ$5.3b) in funds, began buying Fletcher shares in December. Since then the share price has sunk from $6.92 to $6.27 on Tuesday, when the trading halt was announced.
Ellerston’s Australian Share Fund singled out Fletcher Building as one of its ‘‘turnaround stories’’ in its January report to investors.
Portfolio manager Chris Kourtis said Ellerston believed the company’s earnings would ‘‘improve over the medium term’’.
Ellerston Capital’s 5.13 per cent stake in Fletcher is also partially held by its Ellerston Australian Market Neutral Fund, which said in March that it had added Fletcher Building and Adelaide Brighton to its portfolio because the companies were ‘‘underperforming the broader market’’.
When asked for comment, Ellerston Australian Market Neutral Fund portfolio manager Paul Drzewucki said the company did not speak to media.
In addition to the capital raising Fletcher plans to sell its Formica and steel roof tile businesses, in a bid to appease its banking syndicate after breaching lending conditions.
Any entitlements to buy shares that are not taken up by existing shareholders will be offered to institutions like fund managers, and for a retail book-build by share brokers.