Due to significant public interest in the matter, NZX would like to provide an update on its review of trades in the ordinary shares of Lyttleton Port Company Limited (LPC) on Friday 1 August 2014 that matched in the period between the release of a substantial security holder (SSH) notice and the time at which NZX placed a trading halt in the security.
NZX is committed to running fair, orderly and transparent markets. One of the core principles of operating such markets is that all price sensitive information in relation to listed issuers is available to all investors at the same time, via NZX’s market announcements platform.
In relation to LPC, NZX is confident that all market participants, traders and investors, both on the buy and sell sides, had access to the same information at the same time in relation to the proposed takeover of LPC.
Based on the information NZX currently has, the circumstances in relation to the intended takeover of LPC by Christchurch City Holdings Limited (CCHL) were unusual in that:
- LPC was not aware of the intended takeover prior to the SSH being received by it from Port Otago Limited (POL) (at the same time as it was received by NZX) and was therefore unable to make any announcement in relation to it prior to that time
- The two parties that entered into a lock-up agreement, CCHL and POL, are not listed issuers and therefore have no obligation under NZX rules as to release of material information (ie. their agreement to sell and buy shares in LPC) beyond SSH filings in the prescribed form
- The first announcement concerning the potential takeover was included in the potential seller’s SSH, not the buyer’s
- The announcement containing the potential buyer’s press release concerning the intended takeover was received by NZX after the potential buyer’s and seller’s SSH notices
NZX does not intend to take any action to cancel or reverse the trades:
- The trades were not made in error ie. they were not erroneous
- All information in relation to LPC was available to all market participants and investors at the same time
- Specifically, the buyers of the shares traded and the market participant(s) acting for them have advised NZX that they believe they acted on publicly available information and do not consider that there is a basis to reverse or cancel the trades
- We do not believe there was any breach of NZX’s Participant Rules
As NZX’s investigation is ongoing, further action may be taken if evidence of a breach of NZX rules is identified. NZX remains in dialogue with the market participants to further understand and if required reach a satisfactory resolution regarding these trades.
Any potential breaches of the Securities Markets Act 1988 will be referred to the Financial Markets Authority (FMA). NZX is also reviewing its process in relation to the release of SSH notices.
We are also working with FMA to ensure other substantial shareholders and companies that are not regulated by NZX are made aware of their need to contribute to an orderly and transparent market.
Regardless of the eventual outcome of its investigation, NZX considers these events a timely reminder to investors in listed companies that they need to keep abreast of information in the market about the companies they are invested in and the announcements that are being made under each company’s code. This is particularly true for companies in which active investors maintain open orders, as was the case with LPC.
Background
Substantial shareholders (those who hold more than 5% of a listed issuer) have a requirement to inform NZX and the listed issuer concerned immediately of any change in the nature of their relevant interest under the Securities Markets Act 1988, in a form prescribed by regulations. NZX routinely publishes these SSH notices through its market announcement platform in the form provided to NZX. Substantial shareholders are not subject to NZX’s rules nor does NZX have any contractual relationship with them.
Takeovers of listed companies are governed by the Takeovers Code, not by NZX rules. Only under certain circumstances are potential takeovers required to be reported to NZX. These include when a listed issuer becomes aware of a potential takeover, or when the party making or pre-agreeing to accept the offer is a listed issuer.
NZX uses its best endeavours to identify and signal price sensitive information in announcements but does not guarantee that every price sensitive announcement is identified or trading in the issuer is halted when a price sensitive announcement is received. Often announcements identified by NZX as price sensitive do not have an impact on the market price or, more rarely, announcements NZX does not consider to be price sensitive, do impact the market price.
While takeover offers, if announced through NZX, would typically result in a trading halt, this did not occur on Friday as a result of the unusual circumstances noted above. NZX did not become aware of the significance of the SSH prior to publishing it. When NZX did become aware of the details of the announcement (not from a third party), trading was immediately halted and the company contacted. Trading resumed when the notice of potential takeover offer was received from CCHL and was published on the market announcements platform.
However, as noted above, the information contained within POL’s SSH notice was made available to the market via NZX’s market announcement platform in the usual way and therefore all market participants and investors had equal access to the information and were fully informed at all times.