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 issue manager
Comments
Mano Sabnani
12 May 2015
The Singapore Exchange (SGX) urgently needs to review its key criteria for companies to consolidate their shares. It also needs to approve the ratios used for share consolidation and ensure no minority oppression is taking place.
The current exercise to rid the main board of very low-priced stocks is a laudable one but there are problems in implementation. For instance, no weight has been given to the underlying net asset value of a share; consolidation has to take place for any main board stock trading below 20 Singapore cents.
The SGX has also not taken on the responsibility of approving or at least guiding companies on consolidation ratios.
As a consequence, shareholders of many companies are being punished unnecessarily as share consolidation invariably results in value destruction. It is a fact, proven over time and many instances, that share consolidations have the opposite effect of share splits.
The post-consolidation exercise share price is invariably lower than the pre-consolidation value. Also, trading liquidity is invariably lost or much reduced after share consolidation exercises.
Two examples will illustrate my concerns which are shared by many market participants.
Lindeteves Jacoberg: Its share price was 4.2 cents before a 20-into-one consolidation. The consolidation was excessive in my view. LJ’s theoretical ex-consolidation price should have been 84 cents but scarce buyers are now willing to pay only 74 cents. LJ has only 35.5 million shares in issue now, from over 700 million previously.
Why was it necessary to do a 20-into-one consolidation and reduce a shareholder with 20,000 shares to one with only 1,000 shares that he can’t even sell for 84 cents each? A 10-into-one ratio would have been more than sufficient with the adjusted price at 42 cents per share, way above the minimum 20 cents requirement.
Lafe Corporation: Due to moribund management, the company’s share price has drifted down to below four cents from much higher levels years ago. However, its NAV still stands at 11.8 cents. Should not the NAV be taken into account when SGX requires a company to consolidate its shares?
Lafe is a property investment company and the NAV should be realisable should it dispose of its assets. The minorities in this company have been neglected by its Hong Kong majority owners for a long time. Now the board seems to be sounding the death knell on minority shareholders by its push for a 50-into-one share consolidation.
So, theoretically, the consolidated share will be worth S$2. Who will buy this loss-incurring company’s stock for S$2? Why is there a need to consolidate 50 shares into one?
The mainboard company’s 1.2 billion shares in issue will be reduced to only 24 million shares. Lafe’s massive share consolidation is clearly against the interests of small shareholders. It will dry up liquidity completely.
The SGX has to wake up from its slumber and force the company to reduce its consolidation ratio. A 10-into-one ratio should be more than enough, as the adjusted price would be 40 cents and the NAV way above S$1.
There are many other companies that have not got their ratios right. They are punishing their depressed share prices further with excessive share consolidation. The SGX main board is being further deprived of liquidity.
In some cases, the companies should opt to switch to the Catalist board where no consolidation is required. I applaud Joyas International for its decision to transfer to the Catalist board instead of carrying out a share consolidation.
The SGX should be interventionist on this matter and move some mainboard companies to Catalist as well. Clear-cut cases would be companies on the watch list with low share prices. Examples would be Dragon Group, Huan Hsin, Dapai International, Stratech Group and Si2i.