Brokers slap trading curbs on ISR Capital
ISR Capital's big run has made some brokers nervous enough
to impose trading restrictions on the counter. But that has not knocked the
wind out of this year's best-performing stock.
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By Chan Chao Peh
26 September 2016
ISR Capital's big run has made some brokers nervous enough to impose trading restrictions on the counter. But that has not knocked the wind out of this year's best-performing stock.
With effect from Sept 21, Phillip Securities has stopped allowing its clients to buy shares in ISR via its online platform. “Long trades on the counter would solely be on a broker assisted basis,” said Philip Ng, head of credit at Phillip Securities, in an email to its brokers after market closed on Sept 20. “We also request you to be mindful of your clients' aggregate exposure in the counter.”
On Sept 22, OCBC Securities introduced a similar restriction on online purchases of ISR shares. In addition, the brokerage firm now requires clients to make a deposit for full payment for cumulative open positions exceeding $25,000 in ISR.
Some other brokerage firms already had trading restrictions in place before the big run in ISR. CIMB Securities, for example, had put ISR on its restricted list as far back as Oct 4, 2013. That was the day of the big penny stock crash, when Asiasons Capital (now Attilan Group), Blumont Group and LionGold Corp collapsed after a big rally, sparking a major securities fraud investigation that has yet to be concluded.
Elsewhere, ISR is among some 50 counters on UOB Kay Hian's restricted stock list, and the 70 or so on Maybank Kim Eng's list. ISR has been on RHB Securities' list of nine restricted counters since May 17 this year. Lim & Tan Securities also has trading restrictions on the counter.
On the other hand, there is no indication on DBS Vickers Securities' website about outstanding restrictions on any counter. When asked if it has restrictions on ISR, a spokesperson for the firm declined to comment.
Placing out shares
The recent surge in ISR's share price came after the company announced plans to raise money. On Sept 4, ISR said it would raise $12 million by placing out new shares at 8.5 cents to four new investors. Among them was Financial Frontiers, an investment firm led by Bill Ng, who once worked at UOB Kay Hian. Ng is also the second-largest shareholder of CNMC Goldmine Holding.
Immediately after the announcement of the placement, shares in ISR began rising quickly. On Sept 19 alone, it surged more than 70%, from 15.2 cents to 26 cents. On Sept 21, in the wake of the latest broker restrictions, it dropped as much as 20%, before recovering to end the day at 22.5 cents. On Sept 22, ISR gained a further 8.89%, or two cents, to close at 24. 5 cents.
Shares in ISR had already come up a long way when it made the announcement about the placement. Earlier this year, the stock was trading at a fraction of a cent. On May 9, an individual named David Rigali emerged as the largest shareholder of ISR when he bought 265.4 million shares from Value Capital Asset Management at 0.5 cent each. The stock immediately took off. On May 16, the stock closed at 11.7 cents, up 20-fold over just five trading days.
Rigali now owns 28.7% of ISR. He was appointed a non-executive director on May 16, and became an executive director on June 16.
Rigali was previously a shareholder and director of Tantalus Rare Earths AG, a company that now trades over the counter on the Dusseldorf stock exchange. Late last year, TRE-AG agreed to sell a rare earth concession in Madagascar to REO Magnetic, a privately held company in Singapore, whose largest shareholder is Jonathan Lim Keng Hock.
Under the deal, TRE-AG would first sell 60% of the company that holds the concession to REO Magnetic for €3.7 million ($5.6 million). The remaining 40% would be sold to REO Magnetic for shares in an unnamed Singapore-listed company worth at least €10 million.
That listed company now appears to be ISR. Since Rigali appeared on the scene, ISR has agreed to buy REO Magnetic's 60% stake in the company that holds the Madagascan rare earth concession. ISR will pay REO Magnetic $40 million in shares priced at 10 cents each.
On July 18, ISR released a technical report that said the Madagascan concession was worth US$1.08 billion ($1.5 billion). According to the report, Soviet geologists had scoped out the area in 1988. Work so far has focused on "outlining resources". The report did not say whether actual commercial production ever commenced. The concession has changed hands at least twice.
ISR says the proceeds from its recent placement will be used to fund the working capital needs of the Madagascan project. Shares in the company are up some 40-fold since the beginning of the year.