Gen Magnetics investors seek higher exit offer
Delisted firm worth more than 4 cents a share, they say, pointing to property
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Delisted firm worth more than 4 cents a share, they say, pointing to property
By FELDA CHAY
05 April 2011
A one-year wait for an exit offer has brought minority shareholders of delisted multimedia products firm General Magnetics a four-cent per share deal, upsetting investors who feel that the price is too low.
The private offer from General Magnetics’ general manager Ho Loon Ming would effectively value the company at $4 million, based on its issued and paid-up share capital of 100 million shares as at April 1 last year - when it was delisted under Singapore Exchange (SGX) rules after chalking up a string of losses in the past few years, and its market capitalisation fell below $40 million.
However, minority shareholders say that the firm is worth more than $4 million. According to General Magnetic’s 2009 annual report, the company had no debt, and held cash and cash equivalents of $6.6 million three months before it was removed from the Singapore Exchange mainboard.
It also owns a property at Toa Payoh called the General Magnetics Building that was valued at $15 million by an independent professional valuer, Asian Appraisal Company, in early 2009.
Both General Magnetics and Mr. Ho declined to be interviewed.
Minority shareholder Michael Leong said: ‘Essentially, I am shocked that the management has offered four cents a share when it has six cents of cash, no debt and properties worth over 30 cents a share.
‘The key property in Toa Payoh only serves as an office space and they could easily sell this in the open market and not affect their core business,’ said Mr. Leong, who owns 4.999 per cent of General Magnetics. He was the founder of financial portal Shareinvestor.com, which was later sold to Singapore Press Holdings.
Mr. Leong argued that General Magnetics should auction off the property, which he called a ‘non strategic investment’. He has set up a website to rally General Magnetics shareholders.
In his post on the website, Mr. Leong wrote: ‘My hope is to get as many shareholders together as possible and seek a meeting with the management of General Magnetics to unlock shareholder value.’
One issue that minority shareholders have brought up in the last year since General Magnetics’ delisting is how the SGX had allowed it to be removed from the mainboard without making an exit offer.
At the company’s first annual general meeting post delisting last year, one of the company’s independent directors then, Chow Yue Teng, said: ‘SGX - when times are no good, they turn around and say ‘get out’.’
When asked to comment on the General Magnetics saga, David Gerald, the CEO of Securities Investors Association (Singapore), said: ‘It’s strange that the company was allowed to delist without an offer.
‘Shareholders should speak with the SGX about it.’
Under SGX rules, firms are put on the watch-list if they chalk up pre-tax losses for the three preceding fiscal years, and their market capitalisation falls below $40 million over the last 120 trading days.
They have two years to get themselves off the watch-list, or risk delisting. The firm, or its controlling shareholders, will then have to make a reasonable exit offer.
However, some firms have been delisted without making an exit offer because they were unable to provide one. Examples include Chuan Soon Huat Industrial Group and Fastech Synergy.
This is not the case for General Magnetics, which has a relatively clean balance sheet even though it has been dogged by a string of losses in the past few years - $3.7 million (restated) in 2007, $3.8 million in 2008 and $2.4 million in 2009. It was put on the watch-list in 2008.