Thursday, October 6, 2011

Goodman Fielder Ltd: Cutting my losses

The capital raising of $258 million by Goodman Fielder Ltd [GFF.NZX] should, to be frank, piss the hell out of GFF shareholders. While the company has had some bad times over the last 3 years or so management knew what position they were in and failed to respond to a market for their goods that was waivering due to the dire condition of the economy and are only now addressing the problem of their debt levels and falling sales.

I of course failed to listen to myself and should have sold when the share price hit just over 2 bucks in 2010 after being well below that in 2009 but I am either an eternal optimist or a silly old git - I will let you decide which.

The previous CEO managed the company into this mess and I have little faith that the CEO of the last few months will do any better given his previous poor track record.

The company itself has stated that the next 3 years or so will be painful with lower profits and a "restructuring" where presumably non-core assets will be jettisoned and the proceeds put towards paying down that rather large debt mountain but this is a big ask for management considering their poor stewardship of the company since its listing on the NZX in 2006.

I am lucky that I only have a small holding of 2000 shares bought at $2.33 so my loss will not be as big as others but nobody likes losing money. I will lose just under $3000.00 if I sell the main shares at current prices.

There will be a small amount of money coming from selling the rights in the 5:12 rights issue.

GFF shareholders have 3 options.

1. keep the shares and don't participate in the rights issue and sell the rights thereby having their shareholding diluted by almost 50%

2. participate in the rights issue and invest more money into the company.

3. sell the shares now.

If GFF shareholders keep their shares they will have to cross their fingers that management will be able to break their historically bad leadership of the company and the share price recovers at some stage.

Putting more money into such a risky proposition seems, well, risky.

Goodman Fielder @ Share Investor

Capital raising offer document

Is Goodman Fielder Terminal?
Share Price Alert: Goodman Fielder Ltd 3
Share Price Alert: Goodman Fielder Ltd 2
Share Price Alert: Goodman Fielder Ltd
Long Term View: Goodman Fielder Ltd
Goodman Fielder turning on the DRIP
Goodman Fielder to improve bottom line in 2009
Why did you buy that stock? Goodman Fielder
Goodman Fielder hit by high commodity prices
Goodman Fielder a Hedge against an economic slump
Goodman Fielder pie gets bigger

Discuss GFF @ Share Investor Forum
Download GFF company Reports

Recommended Fishpond Reading

Crisis: One Central Bank Governor and the Global Financial Collapse

Buy The Intelligent Investor & more @


c Share Investor 2011