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
Shirley Yam
05 June 2015
In the movies, visual effects are all about creating something out of nothing. Much awarded for that craft, Digital Domain is now pushing the art further, trying to turn something into nothing.
If it succeeds, the reputation of our regulatory regime will disappear too.
Its share price has more than halved in the past week following reports that mainland businessman Che Feng, rumoured to be its major shareholder, had been arrested on the mainland by the anti-graft authorities.
The 45-year-old, low-profile businessman is the son-in-law of former People's Bank of China governor Dai Xiaolong.
In an announcement issued in response to those reports, Digital Domain declined to comment, while stressing that Che was only a convertible bond holder with no equity stake or management role in the company.
The truth is Che is more than just an ordinary convertible bond holder. The papers he is holding can be converted into control of the company at any time.
His influence in the company is masked by a carefully planned deal structure that has sheltered him and Digital Domain from various regulatory obligations.
In April 2013, Che and an ally sold a collapsing visual-effects business founded by renowned director James Cameron to Digital Domain. Instead of cash, the duo got US$392 million worth of convertible bonds that can be swapped into almost 50 per cent of the company's enlarged share capital.
The conversion price is set at a 22 per cent discount to the market price. That means Che can immediately get control of the company, if he so wishes.
The benefits are multiple.
First, despite the lack of voting power, the right he enjoys is no different. Can any manager ignore his will? Can any managerial change happen without his consent? Will anyone dare to battle him for control?
Second, he does not have to make any general offer as required by the law on anyone getting more than 33 per cent of a listed company. In fact, the deal specifies that no conversion will be done if it triggers a general offer.
Third, there is no change in control, saving the company from all regulatory hurdles, including vetting as a new issuer by the Hong Kong stock exchange.
Fourth, a convertible holder - no matter how significant the stake he or she can come up with - is not bound by many rules and need not disclose his or her trading in the company.
Fifth, in case anything goes wrong, his financial interest comes before the shareholders because he's holding debt not equity.
The list can go on and on. No wonder most acquisitions of listed companies have been done this way in recent years.
So unsurprisingly, Che and his ally have not converted any of the bonds, despite the fact that Digital Domain has long traded above the conversion price, and the bond carries no interest.
What's more interesting is that they agreed to extend the convertible bond's expiry date by two years to July 2017 on November 24, when the stock was trading at four times the four HK cents conversion price.
Though control has not been traded on the surface, Digital Domain has witnessed significant changes since Che's asset injection.
It has not only got a new name and logo but also a new chairman, chief executive, financial controller and company secretary.
Among them is Seah Ang, a former banker who joined the company immediately after Che's deal to become its executive vice-president and then chief executive.
Last month, Seah was made chairman upon the resignation of Zhou Jian, the existing controlling shareholder.
Seah, 32, has agreed to spend HK$3.9 billion to acquire 25 per cent of the company from Zhou. How he is going to finance the deal has not been disclosed.
In short, Che and his ally are controlling shareholders without the name.
It is perhaps more ridiculous that people have been allowed to avoid regulatory obligations by buying convertible bonds instead of equities.
This should be stopped.