Wellington, New Zealand, August 13, 2006--Feltex shareholders are investigating legal action to recover the $254 million they stand to lose in the disastrous Feltex float, according to Stuff.co.nz.
Small shareholder activist Tony Gavigan said Feltex shareholders contacted him last week to head a consortium to explore their options through the courts.
"People are emerging and reaching for their cheque books to fund litigation to pursue legal remedies," he said.
Gavigan said he supported the Sunday Star-Times call for the Securities Commission to investigate what went wrong at Feltex.
"But it is not at all clear that such an inquiry, valuable as it will be, will put money back in the pockets of aggrieved shareholders. Only a trial will do that," said Gavigan, who pointed to the 2003 Securities Commission inquiry into then-listed Feltex.
The Stock Exchange asked the commission to look at the accuracy of financial forecasts in the Feltex prospectus. It concluded the prospectus was likely to mislead investors because it did not adequately disclose risks associated with the offer.
However, commission chairman Jane Diplock said no evidence had been found to suggest Feltex directors believed the offer documents were misleading.
It was therefore up to individual investors to consider civil liability in the case.
Gavigan said a Securities Commission inquiry into Feltex would be hugely valuable in getting documents on the table.
"They have enormous powers to require people to give evidence," he said. "But the Feltex case is telling us that will only put money back in shareholders pockets if they seek a settlement, or go to trial, on the basis of those documents."
For nearly a decade, Gavigan has been seeking $23m compensation for Southern Petroleum minority shareholders who allege insider trading over Fletcher Energy's buyout of Southern Petroleum.
"My job is to get small Feltex shareholders together to get the ball rolling," Gavigan said. "Lawyers will have to run it after that."
The joint action by Southern Petroleum's 700 small shareholders had court protection against any losses they may suffer in civil action.
But that had lengthened proceedings enormously, Gavigan said. For that reason, any consortium would comprise shareholders with some financial fire power.
Gavigan would not say how many shareholders had contacted him.
"But there is a lot more people stepping up to the mark now than there initially was with Southern Petroleum," he said.
"When was the last time investors blew the best part of $250m in two years? If this one gets swept under the carpet, then what hope is there?"
Besides potential legal action, the other looming issue for mainly mum-and-dad Feltex shareholders is the likelihood of competing offers at a shareholders meeting some time in September.
Last week, Godfrey Hirst directors, and the owners of bed business Sleepyhead were in Melbourne examining Feltex's books.
Carpet maker Godfrey Hirst will offer shareholders 9c-12c a share if its investigations confirm its views of the company.
Godfrey Hirst would buy Feltex assets, combine manufacturing and operational businesses, but maintain the Feltex brand. Feltex would then be delisted.
Sleepyhead's Graeme and Brian Turner want to recapitalize Feltex with $10m of their own money, and another $25m-$30m from other significant new investors.
With Feltex still listed, they offer shareholders the prospect of sharing in any upside on future growth. They are also making an unabashed pitch in offering a Kiwi rescue bid for a Kiwi company.
And tomorrow, even though they have yet to make an offer, they are launching a website where Feltex shareholders can get the latest information and voice their support.
