(For offers made after 1 December 2012)
What is a "low ball" offer?
A "low ball" offer is an unsolicited offer to buy an investment from you:
- at significantly below the market price; and/or
- where payment is spread over a long period of time.
"Unsolicited" means that you do not know the person making the offer and that the offer is not part of an offer process such as a share buyback from the company whose shares you hold or a takeover.
It is not illegal to make an unsolicited offer to buy someone's investments, or to offer to buy them at a price below their current market value. However, the law requires that such offers must not be misleading or deceptive and that, in most cases, the offers be made in a document headed "Important Information" and that states the market price or fair value of your investment.
Your right to cancel during the "cooling off" period If you have accepted a "low ball" offer and then change your mind you have a right, in most cases, to cancel the resulting agreement, provided you do so within 10 working days of acceptance. See below for more information on how to cancel. |
What to do before deciding whether or not to accept a "low ball" offer
If you receive a "low ball" offer to buy your investment make sure you read the offer carefully and understand all of the terms of the offer, including any fine print in documents and forms relating to the offer.
Questions you should ask before deciding whether or not to accept an offer:
1. Who is making the offer?
Read the offer to see exactly who is making it. Some "low ball" offers are sent on official looking letterhead, using official sounding names, which may sound like the company you have shares with or a stock exchange. "Low ball" offers are also sometimes sent out at the same time as legitimate letters from companies to their shareholders. If you are unsure about an offer you have received, you should contact the company (or its receiver or liquidator if applicable) in which you have an investment and check whether or not the offer is "official".
2. Am I receiving the market price or a fair value for my investment?
Check exactly what price you will receive for your investment and compare it with the current market price or the fair estimate of value of your investment. In most cases a recent market price or fair estimate of value of your investment will be included in a document sent with the offer. You can get an up-to-date market price for your investment, if it is listed on a registered stock exchange, in a newspaper or on a stock exchange's website. Most New Zealand or Australian listed companies will be listed on the NZX (www.nzx.com) or on the ASX (www.asx.com).
If your investment is not listed on a registered stock exchange, the current market price or a fair estimate of value of your investment may be more difficult to establish. An Authorised Financial Adviser may be able to help you. You could also check the following:
- The website of the company you have invested in;
- The original offer documents for your investment;
- The investment statement and prospectus for your investment (if you have a New Zealand investment you can access the prospectus online by searching under the company's or other entity's name at the Companies Office website: www.companies.govt.nz;
- Unregistered securities trading facilities, such as the Unlisted website: www.unlisted.co.nz, which includes price information on some shares and other securities issued in New Zealand;
- If the company you invested in is in receivership, receiver's reports may also give you a good indication of how much you are likely to receive for your investment. Copies of the receiver's reports (if it is a New Zealand company) can be found by searching under the company's name at the Companies Office website: www.companies.govt.nz. You can also contact the receiver directly to find out how much you are likely to receive for your investment and when you can expect payment.
3. When will I receive payment?
Some offers spread payment of the price in instalments over a number of years. In this case the true value of the offer could be much less than it appears because you will have to wait a long time for your money. There is also a risk that, if your payment instalments are spread over a long time, the offeror might go out of business and you will not receive all of the promised payments.
As a benchmark, if you sell your investment through a sharebroker, someone who is a member of New Zealand's only registered exchange, NZX, you are likely to receive payment within just three working days.
4. If I sell will I have to pay brokerage fees?
If you sell your investment through a sharebroker directly you will receive the full market price for your investment, less any brokerage fees. Different sharebrokers charge different fees, but generally you should expect to pay between $30 to $75 as a minimum brokerage fee.
Your right to cancel during the "cooling off" period
In most cases where you have accepted a "low ball" offer, and then change your mind, you have a legal right to cancel the agreement under the Securities Markets (Unsolicited Offers) Regulations 2012. However, you must cancel the agreement during the 10 working day "cooling off" period (see below for what counts as a "working day"). To cancel the agreement you must do one of the following:
- Write to, or email, the offeror and state that you want to cancel or withdraw from the agreement. You must do this within 10 working days after the date on which you accepted the offer. You must also repay to the offeror any amounts paid by the offeror to you under the agreement. You should do this within 20 working days after the date on which you accepted the offer.
- If you have received payment under the agreement, simply repay to the offeror all amounts paid by the offeror to you under the agreement within 10 working days after the date on which you accepted the offer.
Note: A "working day" does not include a Saturday or a Sunday, public holidays, the period between 25 December and 2 January (and if 1 January falls on a Friday, the following Monday or, if 1 January falls on a Saturday or a Sunday, the following Monday and Tuesday).
Where can I get further information or advice?
- For a list of Authorised Financial Advisers (AFAs) in your area see here on FMA's website.
- For a list of sharebrokers see here on the NZX website.
- Search the Yellow Pages for "financial advisers" or "sharebrokers".
- Visit your local Community Law Centre or Citizens Advice Bureau.
Check the latest warnings and alerts and the names of firms and individuals to be wary of here on FMA's website.