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Commission lets investors know New Capital Market is speculative territory

By Chris Hutching

Thursday 20th April 2000

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The Securities Commission has granted the Stock Exchange's New Capital Market exemptions to keep costs down but it is clearly warning people they are investing in speculative ventures.

Securities Commission solicitor Liam Mason pointed out there was no guarantee about the future direction of such companies and investment in them is for people who could bear the loss.

The commission has granted a trial three-year exemption related to various aspects of disclosure.

But Forsyth Barr adviser Andrew McDoual said the New Capital Market was the Stock Exchange's most significant move to empower minority shareholders in recent years.

Launched a couple of weeks ago, the New Capital Market is based on the Alberta-based Canadian Venture Capital Exchange. Stock Exchange chairman Eion Edgar's own firm, Forsyth Barr, is organising broker for the first listing involving Mowbray Collectibles.

The directors include John Mowbray, Ian Halsted and Murray Radford who are offering six companies as potential "key transactions," all of them owned by Mowbray and involved in the collectibles industry in New Zealand and Australia. Mr McDoual said the early demand from investors had been strong.

A prospectus and investment statement are required for the New Capital Market but companies can be launched without the same disclosure or prospective financial information required for main-board listings.

Many listings will be cashed-up shell companies with only a general strategic direction in mind but they have 18 months to find a "key transaction" worth at least $1 million that will form the basis of future business growth. Listing fees are reduced from $400,000 to $100,000.

Directors can look for the key transaction but they cannot vote on it. Only minority shareholders will be able to vote. There are various rules aimed at obtaining the widest possible spread of shareholders.

Mr McDoual said one of the reasons the concept would work well was that a key transaction would be approved if it were in shareholders' interest.

He has another "two or three" other potential listings also in the offing for around mid-May.

A close contender to become the second New Capital Market listing is a e-Opportunity, being promoted by J B Were. The directors include Glaister Ennor law firm managing partner Jack Porus and Kiwi Income Property Trust director Ross Green.

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