By Nicholas Bryant
Friday 5th May 2000
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At its next meeting the NZSE board will investigate whether to adopt the Australian market rules to freeze trading when shell or backdoor listing vehicles take a change of direction - regulations that this week affected dual-listed Frontier Petroleum.
The move signals the NZSE is developing uniformity with its Australian counterpart.
Trading has been halted in Frontier Petroleum shares until July, which has confused local investors but pleased critics of the increasingly trendy backdoor listing strategy.
The suspension of trading was in response to last week's Watson-backed move to bundle 15 Australasian receivables companies together using Perth-based exploration minnow Frontier Petroleum as the vehicle.
But backdoor listings are done differently across the Tasman.
The Australian Stock Exchange demands a business model and projected earnings before companies can resume trading.
ASX spokesman Gervase Greene said the ruling, under ASX Listing Rules chapter 11, was enforced for investor safety.
"We don't like backdoor listings ... we think companies should be able to get their own shareholder spread without backing into someone else's company."
The chapter 11 rule gives existing shareholders the ability to size up a significant change of company direction and decide whether to support or ditch it.
The suspension usually lasts for about six weeks, similar to that of an initial public offering.
In this country it is commonplace for listed companies to plan a change of business direction, suspend sharetrading for only a day as they announce the move and then resume trading immediately.
That has led to calls for greater transparency, as some new companies have received investor support built on dotcom hype.
Mr Watson has used the backdoor listing strategy with his companies New Zealand Petroleum, which turned into Eldercare, and most recently with Frontier Petroleum.
The news of Frontier's suspension surprised local investors. "We've seen heaps of shells transformed of late, all of which traded throughout," one investor on website Sharechat said.
Stock Exchange chairman Eion Edgar acknowledged the recent environment had created an issue and promised it would be investigated.
He said examples such as New Zealand Salmon becoming Newcall, the proposed Force-Ihug deal and Paynter Timber's transformation had created a speculative environment.
"I can understand the rule, but our view has always been to try to allow the market to continue as long as it's fully informed.
"But it is an issue we're going to review at our next board meeting ... with more and more companies trading on both markets [here and Australia] we recognise the need for consistency," Mr Edgar said.
Frontier Petroleum chief executive John Tarrant said the company needed to hold a general meeting of shareholders, probably mid-June, to approve the transaction while complying with the ASX chapter 11 requirements.
Frontier, which by July will be Receivables Management Group, will have to re-enter the ASX on the most basic of levels.
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