SHARE CONSOLIDATION FOR WIDESPREAD PORTFOLIOS LIMITED
The board of Widespread has resolved to consolidate all ordinary shares on issue in the ratio of 1 for 50.
The treatment on fractions of ordinary shares following the consolidation will be that a fraction under 0.5 will be rounded down and a fraction of 0.5 or more will be rounded up.
The record date for the consolidation is 7 July 2008 and the consolidation will take effect as at the commencement of trading on 8 July 2008.
Rationale for Consolidation
Widespread Portfolios listed on the NZX in December 2003 by means of a reverse takeover by NZIJ.co.nz Limited, then a shell company with no assets other than its listing. For the purposes of the takeover, the NZIJ shares were valued at 1.5 cents and 35 of these shares were issued for each existing share in the then unlisted Widespread Portfolios Limited.
This reconstruction resulted in 258 million new shares being issued and a resultant market value for the new company of just under $4 million. The Widespread board has subsequently continued, by means of subsequent share splits, to position the share price as a penny stock on the assumption this would prove additional leverage attractive to investors.
However, during the last four years, while Widespread has continued to demonstrate above average growth rates with total assets exceeding $17.5 million by 31 March this year, the market value of the company has not kept up and appears to be trading at an ever increasing discount to the value of the assets held by the company.
Widespread has recently made a series of presentations to sharebrokers and client advisers as well as holding a well attended briefing for Hawkes Bay based shareholders.
An overwhelming majority of the sharebrokers considered the present price level of our shares to present a problem to them when recommending our shares to clients, because in the minds of many investors a low share price means a low company value.
A typical investor comment was "if we have such a good growth rate why are the shares almost worthless?"
Almost without exception, we were advised to consolidate our share capital in order to eliminate this issue and allow investors to better focus on other investment fundamentals, such as our outstanding return on investment since the company's inception in 1989.
Existing shareholder feedback, particularly in recent times, has been the same.
Accordingly, it has been decided to consolidate our shares in order to reposition their pricing into a range that should be attractive, over time, to a wider range of investors, including institutional shareholders.
Effect on Warrants
The terms of issue of Widespread's "WIDWA" warrants set out an adjustment procedure to be applied following a consolidation. This adjustment has been applied and results in the following:
- The number of shares into which a warrant may be exercised is reduced from 100 shares to 2 shares.
- The exercise price per underlying share is adjusted to $0.993 until 30 June 2009 and $1.493 for the period from 1 July 2009 until 30 June 2012.
Warrants cannot be exercised in part and accordingly to exercise one warrant (and receive two shares) on or before 30 June 2009 an exercise price of $1.986 will be payable (being the same exercise price as prior to the consolidation occurring).
Corresponding adjustments are being made to the series of warrants that were issued to directors following the receipt of shareholder approval at the Widespread annual meeting last year.
On behalf of the Board,