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
R Sivanithy
20 May 2015
Nineteen months after the penny stock collapse there are disturbing signs that history is being repeated, albeit in a not-so-spectacular fashion.
Instead of jaw-dropping 90 per cent losses in one day as was witnessed back in October 2013, in recent weeks there have been “stealth” crashes in low-priced issues such as Civmec, Sinjia Land and CosmoSteel.
The two episodes may be separated by a period of almost two years but they share one thing in common - there are simply too many questions which, if left unanswered, can only undermine already-shaky confidence.
The original trio of LionGold, Asiasons and Blumont whose spectacular plunges triggered 2013’s meltdown in the penny sector are still trading but until today nobody knows who or what was responsible for their losses.
Fast forward to today and there has not been an improvement - stocks can lose significant ground in a short space of time and nobody can be the wiser. In a market ruled by “caveat emptor” that relies on transparency to instil confidence, this should not be the case.
Take for example the odd case of Australian construction and engineering firm Civmec whose shares lost almost 21 per cent from March 13 to 17. When queried by the Singapore Exchange, the company first responded that it did not know of reasons for the fall but later said that it knew of a “motivated seller” who held a “large but not substantial stake who was selling for personal reasons”. That was on March 18 and since then, nothing more has been said.
Quite reasonable questions which might then be asked include who did the selling and what exactly is meant by the term “motivated seller” since it conveys absolutely no informational value.
It is a given that every buyer and seller in the market is motivated to make money, so it is meaningless to say that there was a motivated seller present without elaborating on a specific motivation. Was it forced selling following an unsuccessful margin call? Or was the motivation something more sinister, such as a bear raid on the stock?
Since March 18, nothing more has been said of this incident and although Civmec’s shares have rebounded somewhat, they have only recouped half of their March 13-17 losses.
Along similar lines is the unfortunate Sinjia Land, which - like Civmec - was given a “Trade with Caution” notice by the Singapore Exchange (SGX) after it said it did not know of reasons why its shares fell as they did, other than that it was transferring its mainboard listing to Catalist.
Such a transfer surely cannot be the reason why the stock crashed as it did - 63 per cent from May 7 to 11. Or can it? If it was the reason, then it doesn’t bode well for the dozens of firms which, rather than consolidate their shares to satisfy next March’s minimum trading price of S$0.20, might opt to switch their listing to Catalist instead.
CosmoSteel’s case is slightly different since there was a plausible reason for the stock crashing 38.6 per cent on May 7, a crash which drew the obligatory SGX query. That evening, the company issued a statement that it expected to report lower Q2 and first-half profits but the next day still received a “Trade with Caution” from the exchange.
One might quibble over whether the cautionary notice was needed given the profit warning statement but surely the more relevant question to ask is: who sold?
Moreover, how would Japan’s Hanwa Co Ltd feel about the plunge bearing in mind that only in December it bought a 9 per cent stake in CosmoSteel, paying S$0.58 per share?
Or for that matter naive investors who took heart from the fact that a presumably sophisticated player like Hanwa was prepared to pay a 48.7 per cent premium to CosmoSteel’s volume-weighted market price and as a result might have been tempted to follow suit?
Since the May 7 collapse, the stock has not recovered and at S$0.265, is 54 per cent below Hanwa’s entry price.
A reader in an email discussed these episodes as very troubling and correctly said that at the risk of using a cliche, “justice must not only be done, it must also be seen as being done”. To this should be added “the quicker, the better”.