NZX asks three stocks to 'please explain' soaring prices

Friday, 8 January 2021

Meridian, Rakon and a wine company have all seen unusually high price jumps, triggering queries from the NZX.

Three listed companies have been issued with ''speeding tickets'' by the NZX's regulatory body in the last 10 days.

All three companies, Meridian, Rakon and Marlborough Wine Estates, have had dramatic spikes in share price but said they were keeping in line with disclosure requirements, which compel listed companies to keep the market informed.

Electricity generator Meridian share price jumped 10 per cent on Thursday, potentially influenced by the confirmation of Democrat leader Joe Biden as US President.

The Democrats are expected to invest heavily in clean tech. But NZ RegCo's ''please explain'' applied to an earlier jump in Meridian's share price, from December 21 when it stood at $6.51 to $7.83 on December 29, a jump of 20 per cent.

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It carried on, peaking on Thursday at $9.40 before sliding 5 per cent on Friday to $8.91.

Richard Stubbs, a partner at Castle Point Funds, said there were two possible explanations for Meridian's rise, one being low volumes on the NZX and the other being strong buying by overseas passive funds because of Meridian's green power generation.

Rakon makes components for GPS products, smartphones and telecommunications infrastructure.

''Overseas passive funds will have some kind of investment mandate around responsible investment. They buy irrespective of price.''

Low holiday trading volumes on the exchange also meant share prices could be ''knocked about'' quite easily, he added.

A ''please explain'' was also issued to Marlborough Wine Estates this week, due to its share price rising from 32c on December 18 to 51c on January 6, a hike of nearly 60 per cent. The price on Friday was trading around 56c.

One reason could be news just before Christmas that the wine company had reached a settlement with its insurance company regarding inventory that was destroyed under the supervision of the Ministry for Primary Industries.

The winery has received some of its $1.2 million write-off back, following the liquidation of the wine processor involved. However, the money was not considered material to overall revenue this year.

Marlborough Wine Estates also recently appointed award-winning ex-Montana winemaker Jeff Clarke to work for its O:Tu Estate label.

The third price inquiry related to electronics company Rakon, after its price shot up 21 per cent from 61c at Wednesday's open to 74c on Thursday. Currently the share price is 83c.

Earlier in December, Rakon issued a positive half year review which indicated that demand had risen for telecommunications components.

The company also booked a first half net profit of $4.6 million for the six months to September 30, compared with $1.3m in the previous year.

Rakon said the increase in demand in the second quarter occurred mainly in the New Zealand business as many customers ''managed their supply chain risks by building safety stock''.

NZX spokesman David Glendinning said part of the purpose of price enquiries was to check with companies as to whether there was anything more they needed to tell the market.

Issuers could also make comments to RegCo, ‘’which would remain confidential in the same manner as other aspects of our investigative work'’.