Friday, 15 March 2013

Why is Aussie VC fund much too late with its announcements?

I wrote before about Silverbird. It continues to lose money, with no updates about a possible financial rescue action. Not sure if it is wise to throw more good money after bad money, Silverbird has incurred horrific losses in the past.

The Edge Malaysia reported in its issue dated March 11, 2013 something else that is rather strange. CVC Limited (CVC), a Venture Capital fund from Sydney, announced that it had disposed of large amounts of shares in Silverbird and that it ceased to be a major shareholder. The announcements can be found here, here, here, here and here.

What is remarkable about this is that the announcements have been made almost one whole year too late. The first announcement was made on March 5, 2013 regarding disposals made on April 26, 2012.

There are very clear rules regarding major shareholders disposing shares: announcements have to be made within seven days to Bursa Malaysia. These rules are there for a very good reason, to inform all parties involved.

So why was CVC, a fund managed by financial professionals, who surely are very much aware of the listing rules, so much too late with their information?

It reminds me about an article of David Webb about US fund manager Denver Investment Advisors LLC acquiring a huge stake in Pico Far East Holdings Ltd (one of my favorite stocks) and informing the HKEX 13 months too late about it.

Webb wrote further:

"So Denver Investments has broken HK law. Will they be prosecuted? Almost certainly not, because this once again highlights that foreign shareholders cannot in practice be prosecuted for late disclosure unless they have a presence in Hong Kong, because a summons cannot be served against them outside HK without special permission from the HK courts, which is not lightly granted. See Order 11 of the Rules of the High Court. But Webb-site can name and shame them, and this we now do. A professional fund manager such as Denver Investments should know better and should check and comply with disclosure requirements when investing in overseas markets."

Fund managers, VC funds etc. from countries (US and Australia) with relatively high Corporate Governance standards are supposed to give the good example. In both cases, they seem to have done the opposite.

I hope the Malaysian authorities will shed more light on the Silverbird case, and, if rules are indeed broken, that they will make an effort to enforce the rules.

I am still stuck with one mystery: was no other party aware of what was going on? Did for instance the company secretary of Silver Bird know about the disposals? In the year report 2011 it is mentioned that the shares of CVC are held by "AmanahRaya Trustees Berhad, Exempt An for Perkasa Normandy Managers Sdn Bhd". Was AmanahRaya Trustees aware of what was happening?
It should be relatively easy for Bursa Malaysia to track changes in this account, and if not followed up by a corresponding announcement, to issue a timely query to the relevant parties? From a software point if view, it should be quite easy to generate a report of possible breaches of the listing rules.

Many questions, hopefully soon some relevant answers.


  1. I thought why not automate the Bursa CDS reporting system as IT system has now reached advanced stage. Moreover, there is no necessity to explain the reason for change in shareholdings except close period for directors

    As CDS and reporting system are all managed by Bursa Malaysia, why not have a build-in system to automate the changes immediately than needing secretary or any other person to manually reporting.

    Just an opinion

  2. I fully agree with you. In some cases it might be slightly more difficult, major shareholders having several accounts, but even that is not exactly rocket science. It would force shareholders to reveal the different relationships, which is anyhow a good thiing to do.