Pastoral Dairy Investments, a company associated with farm management firm MyFarm, has canned plans for an initial public offering after failing to attract its minimum NZ$25 million subscription.
The company won't extend its closing offer from today after indications of interest didn't translate into actual investment, it said in a statement. PDI was offering 25 million shares plus oversubscriptions at $1 apiece, and was also seeking $50 million from high net worth individuals.
"We suspect that this lack of demand is mainly due to general investor caution related to the current uncertain economic climate and a lack of familiarity with dairy farming as an asset class," spokesman Neil Craig said.
"We are continuing our efforts to secure one or more large scale cornerstone investor who will provide value endorsement to the PDI opportunity, and provide PDI the scale it needs to be successful," he said.
PDI launched its offer in February in a plan to buy eight or nine farms, most likely in the South Island.
The company planned to list the units on the Unlisted bourse, and offer a formal listing on the stock exchange after its first year of operating.
9 Comments
Minimum investment of 20k to much.
Ithink that they could have lowered the minimum to 2k to attract the ordinary kiwi .
However i think the main reason that funds couldn't be raised was there appeared to be to many greedy little middle men just like when the NZX listed NZS was first formed.
Thankfully now 'NZShas got rid of the middle men and will now prosper ,fingers crossed.
The offer we understand had already been extended once already.
For the amount of $ looked for (and the connected folk involved), one would have thought they'd have known where it would come from before opening the offer. However one can undersrtnd a change in heart from the Mums & Dads/Widows and Orphans, irrespective of advisor commissions.
Stepping back these type of schemes usually come out at the near top phase of a boom (or up cycle, this case the commodity price cycle) - once all the smart money has already been set/tapped out/lending lines maxed.
The question left, is how will the asset value of farms as businesses re-connect with the milk price's commodity price cycle - and farm sales more producing units, rather than "conversion potential" blue sky, not forgetting the quantum of bank debt outstanding.
- and contrary to earlier inpressions, fonterra's branded businesses do not insulate dairy earnings as many had thought (to fonterra's credit they had be saying "these earnings are volatile").
We just need look at the Rio and BHP share price movements since Xmas to see price cycle at work as well.
Where are all the Keep Crafer Farms in NZ Hands? Come on enough with the racism, open up your cheque books. Oh no it was all hot air.
Although maybe the fundamentals of this business - management fees on management fees and no real control over the asset meant it was a dead duck. Rather hold Rural Equities stock on Unlisted than this complicated get rich quick scheme...
Yes, and re RE, as posted here before, Rural Equities shares seem to trade at a 15% to 25% discount to NTA (NTA being each property valued individually and then all the valuations summed together).
However thinking it through, if the shares are always bought/sold for less than the farm values, how do they buy new farms for investment. New farms that one would assume be bought for cash at 100% valuation?
Rural Equities like the other listed REITs (KIP, GMT etc. all hover up and down around NTA.) You buy in for the capital gain (NTA's which are revalued up annually). Its never going to be a great return and you need management whom can trade with the cycle. i.e. sell in the late 2000's as RE did and buy back when it drops. Its is a shame RE has a large majority shareholder and is using excess cash for share buy backs which consoldiate ownership rather than dividends
Disclose - I don't own RE
Thanks, that explains what happens to the cash. Rather than paid out for dividends with tax credit, it is used to fund share buybacks.
Understand what you say about consolidate ownership meaning that..., the majority shareowner position is the one being consolidated....
Other shareholders have their money (their share of operations earnings) used to buy shares off them.
"We suspect that this lack of demand is mainly due to general investor caution related to the current uncertain economic climate and a lack of familiarity with dairy farming as an asset class," spokesman Neil Craig said.
I would suggets you think wrong Mr Craig. The Model proposed here leaves all risk sitting with the investor (as per usual) whilst MyFarm cream significant 'management' rewards which have no downside in the trough of the cycle and no doubt a lot of upside.
The key to any corporate farming entity is to minimise overheads - this is normally acheived through scale of operations and sadly $25m of capitalisation into land, livestock and diary co shares is not a scale business.
To compare to the Crafar's holdings - this sits at about 10% of capital value and I didn't see anyone coming forward with an IPO regarding their former holdings.
The number of individuals worldwide with $1 million or more in assets aside from their residence grew by 8.3% to 10.9 million in 2010, topping pre-crisis 2007 levels, according to the World Wealth Report released Wednesday. Read more
It seems obvious to all, but the numerically challenged, that not all the wealthy people live in NZ. And in fact those that have purchased farm land on a large scale have borrowed the necessary funding and those that are now debt free are only solvent because of the rachet effect of ever increasing loan levels against fixed acreage. Unfortunately income tends to move in the opposite direction as every one else joins in to clip the ticket or profit share with the profligate lending practices of the banks.
A well defined vicious circle with a fast approaching terminal phase - which the banks now seem to want to avoid .
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