Saturday, July 24, 2010

DNZ Property IPO: It stinks

In an ideal world Initial Public Offerings (IPO) are a means of raising capital from the public to enable the company getting the proceeds of such an IPO to use it to grow and prosper into the future. The DNZ Property Ltd [DNZ.NZX] IPO (see DNZ Prospectus)that kicked off earlier this week is certainly one for either the blind, stupid or both or a broker if you haven't sold your allocation to the aforementioned and is far from ideal, in fact it has the rear-end smell of failure written all over it and you dont even have to glance at the glossy, expensive prospectus to get the full stench.

It wouldn't be so bad if the funds raised in the IPO were going back into the business but the big bad, bogeyman up front is that the $35-40 million raised will be going to two overstuffed suits to buy out their management contact.

As the basis for an IPO this has got to be one of the worst reasons to raise cash.

Even if the underlying company was worth you investing your hard earned, can you really trust management of a company and its directors that would allow two individuals to walk away with this much money without doing anything for it?

What kind of agreement was drawn up that this kind of money would be needed to buy out a contract like this of such a small business!!

With these kind of backroom deals going on you know you cant trust management at DNZ Property, now, or in the future - the business is very badly managed.

The big winner will be the brokers, they always are with these kind of turkey IPOs, but I suspect that the small investor like me will be avoiding this stinker like the plague. It will be pushed by your broker because they will get a commission to sell it to you but all you have to say is no I would rather set my money on fire than hand it over to DNZ.

It is sad that this, the highly risky Ecoya Ltd [ECO.NZ] and the heavily debt laden Kathmandu Holdings Ltd [KMD.NZ] IPOs have been the only three calls to the market for capital over the last year or so. The DNZ IPO just took IPOs in NZ to a new low.

Ecoya is at least well managed, Kathmandu has at least a good brand but DNZ is simply a shitty, cynical, little attempt to feather-bed two individuals pockets for doing sweet fanny adams.

No wonder the NZX is performing badly and small investors continue to buy houses instead of shares.

In case you are wondering where I stand, I am of the opinion that the DNZ Property IPO is excrement in the true sense of the word.



DNZ Prospectus

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