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NZX confirms Allied Farmers is out of the NZX 50; stock tumbles

Friday 19th February 2010

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NZX has clarified that Allied Farmers won't join the NZX 50 Index at this time, leaving unanswered questions about how it came to notify market participants on Monday that the recently restructured company would be included. Shares of Allied tumbled today.

Allied Farmers chief executive Rob Alloway told BusinessWire today that he was considering taking legal advice on an email received by market participants, but not by news agencies, on Monday this week.

Alloway says the email informed recipients that Allied would be included in the NZX 50 from next Monday, Feb. 22, and that McDouall Stuart principal, Andrew McDouall, had volunteered the information to him in a conversation this week. McDouall didn't immediately return calls.

The first public statement by NZX on the issue, late this afternoon, says the transfer of failed lender Hanover Finance's loan book to Allied within the last six months was a "significant corporate event" too significant to allow Allied's inclusion in the NZX50 yet.

"Whilst on a six-month calculation ALF would meet the criteria, the significance of the Hanover acquisition has distorted the six-month ranking. A decision has been taken not to include ALF in the NZX 50 at this time," the NZX statement said.

"NZX Index Group has determined that it will evaluate this position after a further appropriate trading period has elapsed."

The Allied share price rose over the course of the week from 10 cents on Monday before the email was sent to 12.3 cents yesterday, a 23% increase, apparently reflecting institutional investors reweighting portfolios tied to the NZX50 benchmark.

More than 8 million Allied shares changed hands this week, with the share price falling 11.3% to 11 cents today, following NZX's announcement. More than 1.6 million shares traded today.

NZX stressed in its statement that "the Index Group at NZX distributes a monthly index memo to data vendors, fund managers and market participants," and that this included the fee-paying new agencies Bloomberg, Reuters Thomson and Iress, none of which reported notifications relating to Allied's NZX50 position earlier this week.

NZX Listing Rules require that the market be advised immediately of potentially market-moving or "material" actions and published on the public access NZX website.

"The stock exchange has made a mistake," said Paul Harrison, equities manager at BT Funds Management.

Trading volumes in Allied Farmers have been volatile since the company took on the assets of failed finance company Hanover Finance, recapitalised and emerged as a potential top 50 listed company in December.

While the share price movements of the last week have been substantial in percentage terms, the share price is a fraction of the $3.25 peak seen in mid-2005.

Businesswire.co.nz

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