17 Mar 2014

Flaws in Feltex prospectus, court told

8:26 pm on 17 March 2014

An investor who lost money in the Feltex collapse will tell a court that he would not have invested with the carpet company if an investment prospectus had not shown it to be in good financial shape.

A class action filed by investors in the failed company began today in the High Court in Wellington.

Within a year of its float, Feltex issued a profit warning and the company went into liquidation in December 2006.

Investors in the failed company are taking a class action against several people. They include former directors, along with organisations which promoted the float or were otherwise involved in it.

The plaintiffs' lawyer told the court on Monday that statements in the prospectus were clearly intended to give investors confidence in the offer.

He said the prospectus claimed that Feltex's market share was likely to increase by 1 percent, when that was not supported by its trading history, and in fact the market share had decreased every year since 1999.

The lawyer highlighted what he says were false or misleading statements made in the prospectus documents for the float. He said that contrary to what was claimed in the prospectus, Feltex itself had not been operating since the 1920s.

He said his clients disputed the sales figures quoted in the prospectus and believed the claim that "Feltex continued to expand its relationship with Kiwi customers" to be misleading and untrue.

The trial is expected to run for several weeks.