Market News 3 August 2026

Johnny Lee writes:

Spark

Spark Limited looks set for a further change, as the company gears up to begin another restructure.

The restructure will look to divide the company into two divisions. The first, Connectivity, will represent the core business of Spark. This includes mobile, broadband and its business arm.

The second division, Digital Services, would encompass “beyond the core” elements of Spark, including its cloud and IT services.

At the same time, Spark announced a strategic review of the new Digital Services brand. While Spark did not commit to a sale of the division, the review was being undertaken to “maximise shareholder value”. 

The review is expected to conclude early next year. The interim head of this division, Greg Clark, has since announced he will be leaving the firm at the end of the year. 

Assuming the review results in a sale of its Digital Services division, the next step would be a determination by the board as to the best use of its proceeds. Recent asset sales have led to significant debt reduction.

The market responded positively to the announcement, with the share price rebounding around 20 cents per share. So far, Spark’s share price seems to respond more positively to announcements which undo initiatives, rather than those that create initiatives.

Separately, Spark also affirmed its previous guidance, ahead of its financial results to be released on August 20. Free cash flow is still expected to total between $290 million and $330 million. At a midpoint, this implies a full year dividend of around 8 cents per share, bringing the total annual dividend to around 16 cents per share.

It has been a lousy few years for Spark. A combination of poor strategic decision-making and a difficult trading environment has led to significant declines to both the share price and the dividend. Its result announcement on 20 August will need to instil confidence in shareholders that the long-term plan, SPK 30, remains on track and that the company has finally found its footing.

2 Cheap Cars

2 Cheap Cars, formerly NZ Automotive, is heading back to private ownership, five years after listing on the exchange.

Its majority shareholder, Yusuke Sena, also known as David Sena, has formally offered to buy back the shares he does not already own. Mr Sena already controls around 77% of the existing shares.

Sena also acts as the company’s chief executive.

NZ Automotive listed in 2021 as a compliance listing. A compliance listing means that the company did not raise capital, instead listing as a way to introduce external shareholders and provide liquidity for existing shareholders.

NZ Automotive operates a series of 10 dealerships across the country under the 2 Cheap Cars brand. Four of these are outside of Auckland, including Hamilton, Tauranga, Christchurch and Wellington (in Lower Hutt).

A large placement occurred shortly after listing, as shareholder Eugene Williams sold 9.3% of the shares on issue, about 20% of his holding, at 93 cents per share. The company’s announcement at the time stated that the purpose of this sell down, which raised approximately $4 million for Mr Williams, was to improve liquidity in the company’s shares.

A few months later, the company was ensnared in further drama following mass resignations across its board, including the resignation of Mr Williams. This was put down to a “fundamental breakdown of trust” and “irreconcilable differences”. The CEO, David Page, also tendered his resignation, shortly followed by its auditor, Grant Thornton, resigning from its role.

The share price collapsed to 44 cents and eventually reached a low of around 23 cents. 93 cents was never seen again.

But the company survived. Its two largest remaining shareholders, Sena and Williams, agreed to a transaction where Sena would acquire William’s remaining holding at 32 cents per share, which was subsequently approved by shareholders. 

Its new CEO Paul Millward then resigned, leading to Sena taking over the CEO role in 2024.

Now, Mr Sena is aiming to take the company private by buying back all the remaining shares at 80 cents each. In recent media interviews, he has expressed the view that the company should never have been publicly listed, stating that the company was not suited for public ownership. 

On this point, he is undoubtedly correct. With a market capitalisation of around $36 million and a full year profit that has ranged from $3 million to $6 million in recent years, the costs of being listed were difficult to justify. This does not just refer to the actual fees associated with the NZX, but also the time and energy required to adhere to the standards expected of a publicly listed company. 

Realistically, with over 75% of the shares tied up long term in the CEOs control, there were few benefits remaining for the retail shareholders, and a takeover was the cleanest way of writing the final chapter of 2 Cheap Cars’ story as a listed company.

Two main lessons should be taken from this affair.

The first is the value of investing in very small companies. Investing in these microcaps can be hit and miss, and has proven to be more miss than hit of late. Many have elected to simply leave the exchange, leaving minority shareholders without a platform with which to trade their shares. In this instance at least, Mr Sena is buying out the remaining shareholders.

The second lesson is the caution required when purchasing shares in a company with a single, very large shareholder. Such investors must ensure that their values and financial goals align with those of the majority shareholder – a rule that applies across the market, whether one is considering Meridian Energy or Winton Land.

Assuming it meets 90% acceptance threshold, 2 Cheap Cars intends to make payment by 24 August. Acceptance of the offer must be done online and is unanimously recommended by the independent directors.

Precinct Convertible Notes

Last Monday, this column discussed the upcoming conversion of the listed Precinct Convertible Notes, PCTHB. This led to some discussion from clients regarding the optimal strategy ahead of the possible conversion of these notes into ordinary shares, as we approach the 21 September conversion date.

Precinct, of course, has the right to repay these bonds in cash, rather than convert them into shares. Such a cash conversion would cost the company $65 million, being the number of PCTHB on issue. The first issue, PCTHA, converted to shares.

Last Thursday, Precinct announced it had raised $65 million via a five-year wholesale bond issue, to “refinance upcoming maturities.” 

A cash repayment of the PCTHB would be most welcome.

Travel

David Colman - New Plymouth - 7 August

Edward Lee - Auckland (Ellerslie) - 6 August

Edward Lee and Gavin Parkes – Wellington – 10 August

Johnny Lee – Taupo – 1 September

Johnny Lee – Hamilton – 2 September

Johnny Lee – Tauranga – 3 September

Johnny Lee – Christchurch – 7 September