Monday, 9 March 2015

XOX: from bad to worse ..... (2)

I wrote before about XOX's proposals, one snippet:

"In other words, current shareholders (who might include loyal shareholders who bought shares of XOX at its IPO price of RM 0.80), who inject further money to subscribe to the rights issue, and who inject even more money to exercise their warrants, will in total only receive 36% of the enlarged shares in the maximum scenario.

And almost all of the dilution due to the restricted issue and SIS will be done at a price that is only a small fraction of the RM 0.80 that shareholders paid at the IPO.

Is this the way the company wants to reward its loyal shareholders?"

The official circular is out. It is a rather long document (108 pages), but what I completely miss is a proper discussion about the huge dilution that normal shareholders will endure if the proposal is approved. In my opinion, it should have been included in the following paragraph:

I find it dubious to mention enhancing of shareholders value without discussing the dilution that they will face.

If one follows all the numbers that are given in the document, then one should be able to work out the dilution. But why is this not transparently presented, accompanied by a proper discussion about the reasoning behind it all?

I have no problem with the rights issue (in which all shareholders can participate), but very much with the huge Restricted Issue (Private Placement) and the massive SIS (Share Issue Scheme).

The Directors will participate in the SIS, and are thus very much conflicted in this exercise (at least that is admitted in the brochure).

I hope that MSWG will be present at the EGM and will grill the Board of Directors about the huge dilution for the minority shareholders.

Bursa Malaysia and the Securities Commission should revisit the rules regarding Private Placements and ESOS/SIS schemes, and limit them to a decent maximum (like 5% or 10% of the outstanding shares of a company).

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