Double Vision – the Z Energy Offer Documents

Writing and issuing a Prospectus and Investment Statement is hard. Every line, statement and inference needs to be checked, rechecked and verified. Every fact stated needs to be backed up by tangible evidence, and financial statements verified by auditors. The promotors and directors sign off on all of the documents, and given that some people that did so during the finance company heydays are now convicted and in custody, the standard of care is very high.

As a promotor and director both I will need to sign any Punakaiki Fund prospectus and investment statement, and so will the other directors and promotors. It would also need to be checked and rechecked by our legal advisors, design agency, insurers and auditors. Finally the Financial Markets Authority reserves up to 10 days to review the documents. They don’t “approve” any documents, but they can ask for changes and even stop proceedings if they are not happy.

So a lot goes on, and believe me it’s an involved, iterative, process. However the document just keeps getting better in the process, though it’s a constant frustration between being able to make things clear to investors (“You could lose all of your investment” in giant type on the first page) versus obeying the letter of the law (two pages of rigid boilerplate text).  In the spirit of lean start-up we are doing a considerable amount of the work internally, and the overall costs per dollar raised will be low versus what is normal for a fund like this.

So while we were a bit amused, most of all we really felt for the team at Z Energy when we saw this in their Investment Statement and Prospectus on July 25th:

By page 204 any reviewer is getting tired, and can be excused for thinking they saw double and moving on. And also the focus in the late stages of review is on looking at document the line by line rather than the overall picture. The other issue is that the words of these documents are generally reviewed in Microsoft Word with change tracking on, while the design is done in something like InDesign, which is not lawyer or change-tracking friendly. So I can see how it’s easy to miss.

The mistake is not misleading – just a bit repetitive. And I noticed today that things were fixed:

I have copies downloaded on the 25th and on the morning of the 26th of July, and they both contain the duplicates. Subscriptions to the IPO were officially opened on the 2nd of August, which is 5 working days after the 26th of July. I’m assuming that this was caught and that the FMA let the change happen (and fair enough), as the date on the prospectus is unchanged.  In theory you have to re-submit a changed prospectus, as some investors may have older copies, and probably wait the 5 day stand-down period again before accepting subscriptions. (The 5 day stand down period is for most offer documents extendable to 10 days, as the FMA can choose to extend their time to look at the documents).

So yes while this is amusing, it’s trivial in the scheme of things and I feel for the team behind the prospectus. I’m assuming that (if we do issue a Prospectus and Investment Statement – we are still “considering”) that we may have our own errors, despite our best endeavours to find them. Go easy on us.

Published by Lance Wiggs