Friday, 31 July 2015

Fake degrees at listed companies? (3)

Received a helpful tip about my post of yesterday regarding Lim Yin Chow.

First of all an example of the disclosure in the 2012 annual report (page 5) of Rev Asia:

Bursa has established that "Dr" Lim has not graduated from the University of Hong Kong. That is bad.

But more worrisome is that he is involved in the healthcare business where his "doctors" title must have carried even more weight.

One example can be found in an interview in The Edge (dated November 29, 2009), listed on the website of HSC (it can also be found on the website of The Edge).

One snippet:

"Dr Lim: We saw how things work there, and wanted to try them here. Over here, most hospitals are opened by businessmen. We're medical people, so we know what the market or patient wants."

The question that remains: is a reprimand and fine from Bursa really enough?

Thursday, 30 July 2015

Fake degrees at listed companies? (2)

Media release from Bursa Malaysia:

Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded and imposed a fine of RM30,000 on Lim Yin Chow, a former Non-Executive Director of Stemlife Berhad (STEMLFE), Signature International Berhad (SIGN) and Rev Asia Berhad (REV) for breaches of paragraphs / Rules 2.18(1)(a) and (c) and 16.13(a) of the Bursa Malaysia Securities Main Market Listing Requirements (Main LR) / ACE Market Listing Requirements (ACE LR).

Paragraph / Rule 2.18(1)(a) and (c) of the Main LR / ACE LR states, amongst others, that a listed issuer/corporation or a director of a listed issuer/corporation must ensure that any statement, information or document presented, submitted or disclosed pursuant to the Main LR / ACE LR must be clear, unambiguous and accurate as well as not false or misleading.

Paragraph / Rule 16.13(a) of the Main LR / ACE LR states that a director of a listed issuer/corporation must not cause a breach of the Main LR / ACE LR by such listed issuer/corporation.

Lim Yin Chow had submitted and/or caused STEMLFE, SIGN and REV to submit inaccurate and false / misleading statements pertaining to his qualification as a holder of degree of Bachelor of Medicine and Bachelor of Surgery (MBBS degree) at the University of Hong Kong in 1992 (False Statements) in various announcements and annual reports of the companies.

I wrote almost exactly three years ago:

"I did a few Google searches with the above mentioned universities, and did indeed get quite a few hits of directors of listed Malaysian companies.  Will Bursa Malaysia or any of the listed companies take action?"

I haven't heard any news from that. It seems Bursa only takes action when it receives a tip off (from the above press release): "arising from a complaint to Bursa Securities and upon investigation".

That is disappointing, Bursa should be more proactive. With a list of diploma mills and Google search they should be able to catch more people.

Tuesday, 21 July 2015

Xidelang: worrying warrants (2)

The company announced the following:

Reference is made to an article published in The Edge Malaysia dated 20 July 2015 stating that no adjustment was made to the exercise price of XDL’s outstanding warrants 2014/2017, which have been issued by the Company on 24 January 2014 and are expiring on 22 January 2017 (“XDL-WB”) following the completion of the Company’s recent bonus issue of warrants on the basis of one (1) warrant for every three (3) existing ordinary shares held (“XDL-WC”) (“Bonus Issue of XDL-WC”).
The Company wishes to clarify that any adjustments to be made to the number as well as exercise price of XDL-WB shall be based on the provisions specified in the deed poll of XDL-WB dated 9 December 2013 (“Deed Poll”).
Pursuant to Condition 5.1.8, Third Schedule of the Deed Poll (relating to issuance by the Company of any securities convertible into or with rights to acquire or subscribe of shares, which in this case is XDL-WC), the exercise price of XDL-WB will be adjusted if the exercise price of XDL-WC is less than 90% of the five (5)-day weighted average market price (“5D-WAMP”) of XDL shares when the exercise price of XDL-WC is determined.
Accordingly, the Company wishes to advise that no adjustments are required to be made to the existing XDL-WB’s exercise price based on the price fixing of XDL-WC exercise price of RM0.115 that was determined at the initial announcement of the Bonus Issue of XDL-WC on 15 May 2015, pursuant to the provision of the Deed Poll. The 5D-WAMP of XDL shares up to and including 14 May 2015, being the date immediately prior to the announcement of the Bonus Issue of XDL-WC is RM0.1048.

The Edge never indicated that Xidelang had broken any rule by not adjusting the exercise price of the WB warrant, in the contrary.

The question is about fairness. Shareholders will receive free WC warrants (something that has real value), while WB warrant holders get nothing. And apparently, the company can continue issuing new warrants without any benefit for the WB warrant holders as long as the exercise price of new warrants is 90% or more of the 5-day weighted average market price.

Added to that, if members of the Board of Directors of Xidelang would have owned a large amount of WB warrants, would they have made the same decision regarding the exercise price for the WC warrants, or would they have chosen a lower amount so that the exercise price of the WB warrants would be adjusted downwards, making their WB warrants more valuable?

I have tried to find the deed for the WB warrants on the website of Bursa announcements, but could not find it.

Sunday, 19 July 2015

Xidelang: worrying warrants

I wrote before about Xidelang's previous warrant issue.

Xidelang issued a new warrant, XDL-WC. The motivation:

The first two are of course blatant nonsense, since all shareholders receive the same deal there is no reward for any specific shareholder.

And if all shareholders exercise their warrants, then they all have more shares, but in percentage of course still exactly the same.

Let's put it differently: Warren Buffett has managed Berkshire Hathaway for 50 years, increasing the share price from around USD 20 to around USD 200,000, a ten thousand fold increase. He did this without ever issuing warrants (or bonus shares or rights shares or any other instrument).

Can Warren Buffett be accused of not having rewarded its shareholders by not issuing truckloads of warrants?

Xidelang IPO-ed on Bursa in 2009, and the share price is still lower than its IPO price. Just to put things in perspective.

Would it not be better if Xidelang would simply mend its business, instead of bothering with the attempts at financial engineering through issuing all kind of instruments?

The third and fourth reason mentioned above are potentially "dangerous", some companies who issue warrants count on the money to come in from the exercise, but when the shares suddenly go down no warrant is exercised and the company runs into financial troubles.

The Edge Malaysia (edition July 20, 2015) published a article "Why, Xidelang?" in which it wrote that Xidelang has not adjusted the exercise price of the previous warrant of Xidelang, XDL-WB, which was issued last year, leaving it at 35 sen against the mother share of 16 sen.

The Edge writes: "as of the end April 30, none of the directors surface as the 30 largest holders of XDL-WB. Could this be the reason for the nonchalance?".

This sounds outright unfair for the holders of those WB warrants.

And strangely enough, it seems to be allowed according to the rules.

I wrote a few times about the horrific treatment warrant holders get for instance at a delisting exercise (here and here).

For minority investors in shares the environment on Bursa is already difficult enough from a corporate governance point of view. So often the big guys win.

But for investors in warrants things appear to be much worse, they don't have much rights at all.

That bags the question: is the public properly informed of this, is there a label attached to warrants warning potential investors about the lack of rights that they will have?

If the rights of warrant holders are so minimal, why can Bursa not simply do away with them? These financial instruments are simply not needed. Abolishing them will not negatively impact the Malaysian economy in any way, shape or form. If there is any impact, it would be (slightly) positive.

Wishing all Muslim readers: