TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issu...
Comments
Shirley Yam
22 May 2015
George is a private entrepreneur from the mainland. He has listed his business in Hong Kong. The first thing he does on listing here is not improving his business, but pushing up the price of the stock.
Not that he is terribly interested in the share price per se. He only wants a multibillion-dollar company so that he can borrow from mainland banks. Now, that is where the real honey is.
To push up the price, he has to corner the shares in the market. He needs some unconnected parties to hold the shares on his behalf to stay out of the regulators' radar.
Things like this used to be quite difficult and would be done by fund managers under the table. Thanks to the hordes of mainland financial institutions and private funds coming to the Hong Kong market these days, deals like these can now be done in broad daylight.
Some of these institutions even have teams screening such proposals. In the current buoyant market, a team like that can easily be sitting on eight to ten proposals, each asking for US$30 to US$50 million.
George signs an agreement with a private fund. It buys a stake in George's company from the market. In return, George promises to buy back the stake within 12 months, with a guaranteed return of 20 per cent. In some cases, deals like these are done through convertible bonds.
The fund isn't stupid. It pledges the agreement to a mainland financial institution and gets a sizeable loan itself.
It pays US$30 million to buy the stake but gets a US$45 million loan because George has managed to push up the share price by 50 per cent and therefore the value of the contract, thanks to the drop in share supply. In short, the higher the share price, the more both George and the fund helping him are able to borrow.
Thanks to the ample liquidity on the mainland, George has easily found a dozen such funds eager to help him, cornering almost 99 per cent of his company's stake.
He's not alone playing this high-stake game in this market. According to the spate of recent announcements of the Securities and Futures Commission, some companies now have 99 per cent of their stakes in the hands of less than 10 investors.
With the supply of George's stock drying up, they can easily hit sky high in weeks, making them what the Chinese call "fairy stocks". It took no more than US$20 million a day to engineer that outcome.
A key player here are the lending banks. Why are they happy to take the risk? Well, it is a Hong Kong-listed company with a multibillion-dollar market capitalisation, and mainland banks have a different definition of risk.
Of course, George has not forgotten to do some interviews with the mainland media and throw some lavish parties to clinch his super-rich credentials. That helped to impress the bankers.
When the contract expires, George is to pay the helpful financial institution US$120 million with his own money, or find another helpful fund to take over the stake. In this round, the guaranteed return has increased to 30 per cent to reflect the risk.
It is not hard to see how George's risks and financial burden have multiplied. Let's not forget he has already pushed the share price up so the window of opportunity is narrowing. To cough up a 30 per cent return, he has to push up the price of his stock by at least 30 per cent.
So the game goes on until a day when his contact in the government is arrested by the graft busters. George has his cash locked up in some property project that has now been put on hold.
As a standard clause in many of those contracts, he has a grace period of six weeks to do a managed sale of the stake for the fund helping him out. Obviously, no one wants a fire sale, or else both get burnt.
George tries his best to support the price to take some profits but eventually time runs out. The fund instructs a sale of the stake that George had deposited with a mutually agreed broker. The stock dives.
George has to be a fighter. The share price is tied to the loan he's getting from mainland banks. That's his lifeline.
Don't try to figure out who George is. There are many in the market these days.