Investing Failure? Forestlands in the News

When I was young I had issues with credit cards. But I also knew that I should be investing. I was miles away from understanding shares or buying a house but I did stumble across a company offering an investment in pine trees. Forestlands looked like a family run company and you could buy a share in a forest including the land underneath it for $1000. Well I never had $1000. It was not in my capacity at that time to save like that. But Forestlands offered a payment system where you could pay the investment off over 1-2 years. I was instantly sold. Did I do any research into forestry markets? No. Did I read the documentation? Yes but not well. I think I missed a few things. The main thing I missed is that these were B-class shares, meaning no voting rights. That’s never going to be good.

So at the end of March I received a letter informing me that all the Forests have been sold. They couldn’t tell me what my investment was worth and even had a line in the letter advising investors NOT TO CALL and ask because they didn’t know yet. Talk about alarm bells. How can you sell off an asset which has a schedule of investors and their share of the assets and not know how to distribute the funds. Madness.

Forestlands investors left in the dark

So a few investors complained and now the Financial Management Authority is involved and they have got the Serious Fraud Office investigating Forestlands. Apparently there is 18 million in a trust to be distributed to the investors but that doesn’t look like anywhere enough money to even get back what was initially invested. There are rumors that the head of the trust that owns Forestlands actually sold the forests for a lot more and has pocketed almot 19 million dollars in “fees”. We’ll just have to wait and see what the SFO and FMA manage to dig up.

Our Nation Business Review is covering the issue but most articles are behind a paywall so its been hard to keep up with the gossip on the matter but you can see from the pained comments on this article that is affecting quite a few New Zealanders. Forestlands always maintained a folksy family friendly type communications and sent out chocolates with annual updates. It gave them an air of trustworthiness which meant a lot of families felt comfortable buying a few shares for their children as well. Grandparents invested on behalf of granchildren hoping that in the time it took the forest to grow the invest would be worth enough to offset some university fees.

Its hard to keep emotion out of it. My shares in the forest represent about 1% of my total assets. So its a loss I can afford to absorb and move on but you can bet that I feel outraged over the way the Director (Rowan Kearns) has acted.