Fairvest linked units have retreated from their issue price of 150c a linked unit towards the 50c mark, which naturally made many Fairvest investors wish they had the put options, which are priced at 165c a linked unit.
A put option is a right to sell at a particular future date and at a predetermined price. The put option becomes attractive when the security it is held against trades at a price below that of the put option.
The put option under review was due to a portion of Fairvest linked unit holders known as the former Glocash shareholders. These investors held a put option against 50% of their 9,9-million Fairvest linked units issued when Fairvest reverse listed a property portfolio into Glocash in December last year.
Shortly after November 30 this year, the date at which the put option was exercisable, Fairvest issued a statement saying its unit holders exercised put options over substantially more units than could possibly have been the subject of the option.
'In many cases the options have not been exercised in the prescribed manner to constitute an acceptance of the put (option),' said Fairvest.
It said the process was worsened by an offer, made incorrectly on behalf of Fairvest MD Niki Vontas, to buy up to 51% of the group's issued linked units by a third party. Vontas said last week the group had launched a preliminary investigation into the matter before it would consider taking legal steps.
'We want to make sure whether this was a fraudulent act or an innocent misunderstanding by certain linked unit holders before we take further steps,' said Vontas.
He said the results of the investigation, due this week, should also determine whether this was a malicious act.
'We suspect this has been orchestrated to cast an element of doubt on the financial standing of the company,' said Vontas.
'When you give people an expectation that they will get a payout of 165c a unit against a company trading at 60c, they will get very disappointed when that does not happen, even when it was based on incorrect information,' said Vontas.
'We suspect this is an attack on Fairvest's credibility,' he said.
He said, given the dominance of holdings in nominee companies or by central share depositary participants, that it had proved difficult to determine which of the units' claims to the option had been correctly tendered.
This was complicated by some terms of the put option, which precluded unit holders who were eligible to exercise their options from dealing in their units during the currency of the option.
Fairvest has announced its intention to acquire listed property fund Bonatla, which has not been well received by some stakeholders in Bonatla.
Some observers believe the problems relating to the put option and the false offer to Fairvest minority shareholders is somehow linked to the proposed Fairvest/Bonatla deal.
Business Day
Publisher: Business Day
Source: Inet Bridge
