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Monday, 11 May 2009
Jade takeover probe: Answers needed
The Jade Technologies takeover 14 months ago was one of the biggest corporate debacles of recent years, but the long-awaited sequel - the official report into the fiasco - remains as elusive as ever.
The Jade Technologies takeover 14 months ago was one of the biggest corporate debacles of recent years, but the long-awaited sequel - the official report into the fiasco - remains as elusive as ever.
Investors would be advised not to hold their breath. The Commercial Affairs Department (CAD), which began investigating the failed buyout more than a year ago, told The Straits Times last week that ‘investigations are still ongoing’.
While the CAD probes every angle of the botched buyout, it is a cliffhanger for the investment community.
There is still considerable anger over the way the takeover unravelled - and the millions of dollars it cost investors - so the report, when it does come, will allow the matter to be finally put to rest.
It will also allow the many investors caught in the fallout to decide whether to take legal action or write the whole thing off as a bad joke.
The CAD findings will also, hopefully, shed light on the various corporate governance issues thrown up by the failed takeover and enable the authorities to tackle thorny questions, such as whether existing safeguards to protect investor interests are adequate.
It is worth recalling the whole sorry episode and the deficiencies and loopholes it exposed in the Singapore Exchange’s disclosure-based regime.
Dr Anthony Soh made an offer of 22.5 cents a share in February last year to buy up the remaining 54 per cent of Jade shares he did not already own. It looked like another routine buyout during a period when many mergers and acquisitions were occurring.
But one week before the acceptance deadline, he suddenly withdrew his offer after the bulk of his Jade stake was force-sold by Merrill Lynch.
The sale was to repay a $25 million loan that Dr Soh owed an Australian broker, which had subsequently gone belly up.
But while Merrill was dumping the Jade shares, small investors were snapping them up in the hope of making a small, risk-free profit from Dr Soh’s takeover offer. They were blissfully unaware of what was happening behind the scenes, and so were badly burned by Jade’s subsequent collapse.
Investors were furious at Dr Soh’s failure to disclose that he had pawned the bulk of his Jade shares for a loan.
They also wanted to know why details of his financial dealings were revealed only after Merrill had force-sold the shares.
The takeover’s financial adviser, OCBC Bank, was also dragged into the fiasco. Investors had taken at face value a disclosure in the offer document that Dr Soh had direct ownership of the shares.
A farce with plenty of blame to go around and it’s true, some action has been taken to rap the knuckles of those involved.
Last October, the Securities Industry Council, which administers the takeover code here, censured both Dr Soh and OCBC for their roles.
The following month, OCBC sued Dr Soh for allegedly misleading it into acting for him.
It claimed that his takeover offer was nothing more than a scheme ‘devised to support or ramp up the price of Jade shares’, and launched ‘on a completely false basis as to the level of his shareholdings in Jade and the source of funds for the completion of the offer’.
But the legal tussle between the two parties offers no solace to aggrieved investors who had lost millions as a result of Jade’s failed takeover.
They are left none the wiser as to what really happened and have been looking to the CAD to shed some much-needed light.
The Jade wash-up has also prompted calls to the Singapore Exchange (SGX) to tighten disclosure rules to require major shareholders and key appointment holders to disclose any significant financial arrangements they have made over their stakes.
If the SGX had taken such remedial action, it might have got a handle on another problem besetting the market - the blatant manner S-chip bosses have been pawning their entire shareholdings, and so endangering their firms.
Some investment bankers and lawyers have objected to such disclosures, arguing that it would be an invasion of privacy over the personal financial arrangements that might be made by directors and major shareholders.
They also argue that it is a ‘world- first’ that Singapore would rather not achieve as it would erode the edge the local bourse enjoys as a listing destination.
The suggestion is that foreign companies would make a beeline for more ‘investor-friendly’ markets such as Hong Kong.
Such arguments are disingenuous. Singapore would not be the first market to impose stricter disclosure requirements on directors and major shareholders who pledge their shares for loans.
Britain’s Financial Services Authority ruled in January that company directors must disclose personal loans taken out against shares in their own companies.
It initially aroused howls of protest, with claims that well-qualified people would be deterred from becoming directors of public companies.
But there has been no mass resignation of directors in Britain.
Disclosures made by more than 80 British-listed firms that one or more of their directors had taken loans using shares as collateral failed to create much of a stir.
Given the reputational damage done to our local market as a result of the missteps at companies such as Jade, speedy action is needed to rebuild investor confidence.
The CAD findings on Jade may provide answers on the type of additional safeguards needed.
Greater disclosure by company bosses on what they are doing with their shares is a small price to pay to restore market confidence.
1 comment:
Jade takeover probe: Answers needed
Goh Eng Yeow
11 May 2009
The Jade Technologies takeover 14 months ago was one of the biggest corporate debacles of recent years, but the long-awaited sequel - the official report into the fiasco - remains as elusive as ever.
Investors would be advised not to hold their breath. The Commercial Affairs Department (CAD), which began investigating the failed buyout more than a year ago, told The Straits Times last week that ‘investigations are still ongoing’.
While the CAD probes every angle of the botched buyout, it is a cliffhanger for the investment community.
There is still considerable anger over the way the takeover unravelled - and the millions of dollars it cost investors - so the report, when it does come, will allow the matter to be finally put to rest.
It will also allow the many investors caught in the fallout to decide whether to take legal action or write the whole thing off as a bad joke.
The CAD findings will also, hopefully, shed light on the various corporate governance issues thrown up by the failed takeover and enable the authorities to tackle thorny questions, such as whether existing safeguards to protect investor interests are adequate.
It is worth recalling the whole sorry episode and the deficiencies and loopholes it exposed in the Singapore Exchange’s disclosure-based regime.
Dr Anthony Soh made an offer of 22.5 cents a share in February last year to buy up the remaining 54 per cent of Jade shares he did not already own. It looked like another routine buyout during a period when many mergers and acquisitions were occurring.
But one week before the acceptance deadline, he suddenly withdrew his offer after the bulk of his Jade stake was force-sold by Merrill Lynch.
The sale was to repay a $25 million loan that Dr Soh owed an Australian broker, which had subsequently gone belly up.
But while Merrill was dumping the Jade shares, small investors were snapping them up in the hope of making a small, risk-free profit from Dr Soh’s takeover offer. They were blissfully unaware of what was happening behind the scenes, and so were badly burned by Jade’s subsequent collapse.
Investors were furious at Dr Soh’s failure to disclose that he had pawned the bulk of his Jade shares for a loan.
They also wanted to know why details of his financial dealings were revealed only after Merrill had force-sold the shares.
The takeover’s financial adviser, OCBC Bank, was also dragged into the fiasco. Investors had taken at face value a disclosure in the offer document that Dr Soh had direct ownership of the shares.
A farce with plenty of blame to go around and it’s true, some action has been taken to rap the knuckles of those involved.
Last October, the Securities Industry Council, which administers the takeover code here, censured both Dr Soh and OCBC for their roles.
The following month, OCBC sued Dr Soh for allegedly misleading it into acting for him.
It claimed that his takeover offer was nothing more than a scheme ‘devised to support or ramp up the price of Jade shares’, and launched ‘on a completely false basis as to the level of his shareholdings in Jade and the source of funds for the completion of the offer’.
But the legal tussle between the two parties offers no solace to aggrieved investors who had lost millions as a result of Jade’s failed takeover.
They are left none the wiser as to what really happened and have been looking to the CAD to shed some much-needed light.
The Jade wash-up has also prompted calls to the Singapore Exchange (SGX) to tighten disclosure rules to require major shareholders and key appointment holders to disclose any significant financial arrangements they have made over their stakes.
If the SGX had taken such remedial action, it might have got a handle on another problem besetting the market - the blatant manner S-chip bosses have been pawning their entire shareholdings, and so endangering their firms.
Some investment bankers and lawyers have objected to such disclosures, arguing that it would be an invasion of privacy over the personal financial arrangements that might be made by directors and major shareholders.
They also argue that it is a ‘world- first’ that Singapore would rather not achieve as it would erode the edge the local bourse enjoys as a listing destination.
The suggestion is that foreign companies would make a beeline for more ‘investor-friendly’ markets such as Hong Kong.
Such arguments are disingenuous. Singapore would not be the first market to impose stricter disclosure requirements on directors and major shareholders who pledge their shares for loans.
Britain’s Financial Services Authority ruled in January that company directors must disclose personal loans taken out against shares in their own companies.
It initially aroused howls of protest, with claims that well-qualified people would be deterred from becoming directors of public companies.
But there has been no mass resignation of directors in Britain.
Disclosures made by more than 80 British-listed firms that one or more of their directors had taken loans using shares as collateral failed to create much of a stir.
Given the reputational damage done to our local market as a result of the missteps at companies such as Jade, speedy action is needed to rebuild investor confidence.
The CAD findings on Jade may provide answers on the type of additional safeguards needed.
Greater disclosure by company bosses on what they are doing with their shares is a small price to pay to restore market confidence.
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