Blumont beats retreat after relentless surge
Share trading halted today pending announcement by company
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Share trading halted today pending announcement by company
Cai Haoxiang
04 October 2013
Blumont Group yesterday called for a trading halt to be imposed today “pending release of (an) announcement” as shares in the company surrendered more gains yesterday after a U-turn on Wednesday from its long rally.
The stock closed the day down 37 cents, or 15 per cent, at $2.02, after Wednesday’s five-cent fall, in what some observers see as an indication that the stock is losing steam after a relentless surge this year.
About 28 million shares worth $64 million changed hands, making the company the second-most traded stock by value on the Singapore Exchange (SGX) yesterday, ahead of blue chips like UOB, DBS and Keppel Corp.
“We can blame the share price drop on pressure by regulators, but I feel speculators may have taken a step back to see how the company is going to deliver on its plans,” said Roger Tan, chief executive of Voyage Research.
Meanwhile, today is the last day that Blumont’s nil-paid rights can be traded. They had fallen from a high of $2.57 on Monday to a one-week low of $2 yesterday.
A nil-paid rights transaction essentially means the seller is passing his entitlement to subscribe for rights shares to the buyer.
Blumont announced the issue of 861 million rights shares on July 29, at a ratio of one rights share for every two ordinary shares.
The issue price of five cents was at a massive 94.5 per cent discount to its theoretical ex-rights price of about 90 cents a share, and an even larger discount to the volume-weighted average share price of $1.33 that Blumont was trading at prior to the rights issue announcement.
“(Nil-paid) rights are like short-term warrants (instruments giving the option to buy underlying stock at a fixed price, till expiry),” Mr Tan said.
Some observers said that the price of the nil-paid rights went up in tandem as the underlying stock surged above its theoretical ex-rights price amid speculative fever.
At one stage, the nil-paid rights price even defied logic as it traded above the underlying stock.
In the past nine months, Blumont’s share price had risen rapidly from an adjusted 20 cents at end-2012.
The shares had traded ex-rights on Sept 19 and continued to defy gravity, closing at a historical high of $2.45 this week.
This valued the company at $6.3 billion - three times the price of established transport operator SMRT Corp.
The spectacular rise, as well as the illogical price Blumont nil-paid rights traded at, triggered an unusually detailed query from SGX on Tuesday about the company’s share trading activity.
Blumont replied on Wednesday that, among various things, its expansion into the mineral and resources sector had drawn interest from abroad, including a fund that might pump in additional money through a private placement.
Rights holders can accept the issue and pay the five cents a share for their Blumont shares till next Thursday.
The rights shares are expected to be issued on Oct 21 and start trading the next day.