The NZX has implied it can't use a clause in its rules designed to protect the exchange's reputation to block the proposed "backdoor" listing of Kim Dotcom's Mega online storage business.
The exchange said a year ago, when Mega first mulled listing on the exchange, that listing was a "privilege" and not a right.
Spokeswoman Kate McLaughlin said on Tuesday that several issues arose when considering whether to approve any notice of meeting relating to a transaction that would change the essential nature of a listed business. The NZX would take into account "all relevant information available to it" and whether there was adequate disclosure for shareholders to appraise the transaction.
Mega's proposed backdoor listing involves a reverse takeover by listed company TRS Investments, which would be classified as a "major transaction" for TRS.
McLaughlin today clarified that companies did not need NZX approval to carry out a major transaction. However, the exchange did need to approve the information provided to shareholders in relation to any major transaction.
A clause in the NZX's rules that states it will not facilitate the listing of companies whose directors have a history of unsavoury practices "does not apply to the process for NZX approval of a notice of meeting after listing", she said.
That appears as close as the NZX is likely to get to answering the question of whether it could block Mega's proposed backdoor listing on reputational grounds.
"We do not intend to comment beyond this," McLaughlin said.
Mega chief executive Stephen Hall said on Tuesday he hoped Mega would float on the NZX by the end of May. It had not yet been decided who the company's directors would be if the reverse takeover by TRS went ahead.
Dotcom is not a director of Mega, though fellow copyright-accused, the former MegaUpload chief technology officer, Mathias Ortmann, is a director.
The New Zealand Shareholders' Association (NZSA) said today it was concerned investors were getting caught up in the hype surrounding Mega's proposed backdoor listing.
TRS shares have jumped from 0.1 cent prior to the Mega announcement to trade as high as 1.3c today.
NZSA chairman John Hawkins said: "We don't have any information at this stage about Mega's business, it's only a proposal, but the association is concerned that people are getting carried away on the hype and forgetting to look at the underlying numbers".
Hawkins was concerned those rushing to buy TRS shares ahead of the deal did not understand that the company would then do a 148-for-one share consolidation.
More than half a million shares have traded since the announcement TRS planned to issue 700 million shares to buy Mega. The transaction values Mega at $210 million on paper.
Hawkins was concerned some investors might not be fully across the numbers.
"Speculation is fine, it's not illegal, but if people get caught up in hype they can't expect anyone to bail them out.
"Investors have to accept the commercial risk of their decision," Hawkins said, adding the NZSA would be working to ensure its members and others looked closely at the numbers.
- Fairfax Media