Wednesday 2 September 2015

Silverlake Axis down 24%, suspended, after damning report (3)

Silverlake Axis has responded, one snippet:

"the Board has decided not to dignify the Report by preparing its own point-by-point rebuttal".

That is very unfortunate, and I doubt it is in the best interest of the Company's loyal minority shareholders. A point-by-point rebuttal might have given the much needed clarity regarding the issues at hand. I find the reasoning not to give this rebuttal rather weak.

The Board also did not come with a plan to improve its corporate governance in general, particularly the transparency.

The only plus point is:

"the Company will be engaging Deloitte Singapore, as an independent third party, to undertake an independent review of the allegations concerning the related party transactions entered into between the Company and the Silverlake Private Entities and the associated profit margins as referred to in the Report and to provide its findings and conclusions as to their veracity, which the Company will publish in due course."

But this might take a while. Also, Deloitte will not address the other issues raised.

An article in The Star offered a remarkable sentence:

"Goh pointed out that the lines of responsibility are clear within the company as the board has control over its running while he concentrates on research."

The running of the company is the responsibility of the executive directors, in this case the CEO and Goh himself. The other members of the board are non-executives, surely they are not responsible for the running of the company, they will lean more towards strategy and oversight. It almost sounds like Goh (Founder, Chairman and majority shareholder) doesn't feel responsible for the issues, rather concentrating himself on research. Strange, since the huge network of related companies are owned and founded by him.

With the share price almost half of the price a few months ago, I would have thought that a much stronger reaction was needed, especially directed to the more concrete allegations in the 42-page article.

I still struggle with the high reported revenue per employee. For instance here there are many discussions about hiring and working for Silverlake. Reading through dozens and dozens of postings I do not get the impression that Silverlake is hiring the best of the best (for instance only from top universities), has rigorous interviews and pressures their employees, enabling the company to bill top dollars. This was one of the issues raised by the short seller report.

As interested observer, I guess we need time to see how things will pan out in the future.

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