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Investors warned over unsolicited share purchase offers

Friday 27th August 2010

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The Securities Commission has warned investors about unsolicited share offers following a successful low-ball offer by Carrington Securities for stock in property company DNZ Property Fund.

Carrington offered 60 cents a share for DNZ shares at or before the time their listing changed from the Unlisted market to the NZX on August 16. He managed to snare 2.2 million shares at the price, while DNZ subsequently listed at 97 cents each, and are currently selling at $1.03. Carrington is now the seventh-largest shareholder in DNZ with 0.9% of the company.

Bernard Whimp, the partner in Carrington Securities, was banned from being a company director for four years in October 2006. He skirted the ban by setting Carrington up as a limited partnership and using that as a vehicle for his offer. DNZ expressed disappointment that he managed to convince some shareholders to part with their stock, and referred the matter to the Securities Commission.

The Securities Commission guidance said investors receiving an unexpected letter offering to buy some of their interests should be aware of some pitfalls they may face.

“Although it is not illegal to make an unsolicited offer to buy someone’s investments, and even to offer to buy them at a price below their current market value, it is against the law to mislead or deceive investors into accepting an offer,” the regulator said.

Inexperienced or elderly shareholders, or those under immediate financial pressure are most at risk of signing away their investments the commission said.

“We recommend that you take the time to check you understand a few simple facts about the offer, and seek advice and support from another person,” the statement said.

The commission said some basic questions should include who is making the offer, what does the offeror stand to gain, do you really need to sell now, what is the market price for your investment and how much is the offer really worth?

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