Showing posts with label XiDeLang. Show all posts
Showing posts with label XiDeLang. Show all posts
Monday, 3 August 2015
XiDeLang: Deal or no deal? (2)
Xidelang made another announcement and in a remarkable turn of events, has revealed most of the information regarding Yangsen as requested by Bursa:
Sunday, 2 August 2015
XiDeLang: Deal or no deal?
XiDeLang announced:
"..... that the Company is proposing to enter into a Heads of Agreement in relation to the Proposed Acquisition of the entire existing business and undertakings of JinJiang YangSen Garments Co.,Ltd (YangSen) including all of its assets and certain agreed liabilities ("Proposeed Acquisition")."
The wording in the attachment is however different: "that the Company has on 29 July 2015 entered into a Heads of Agreement with YangSen".
"Proposing to enter" and "has entered" are of course very different.
The announcement mentioned that XiDeLang proposes to settle the (yet to be decided) purchase amount "via cash and/ or issuance and allotment of new ordinary shares of USD0.03 each in XDL (“XDL Shares” or “Shares”) at the issue price of RM0.22 per Share".
RM 0.22 was clearly higher than the last traded share price, if the seller of the business is agreeable to receive shares of XiDeLang at such a price that looks like good news. Not surprisingly the share price of XiDeLang increased the next trading day.
Bursa decided to query the company, because the announcement was "rather devoid of details" (to put it mildly).
The company answered the queries in a rather astonishing way:
The following information regarding YangSen is currently unavailable:
How is it possible to sign a Heads of Agreement to purchase a business when the most basic facts are not known? It looks like XiDeLang has not even seen the last accounts.
Why does XiDeLang announce this "non-information", why does it not wait until it has more information?
"..... that the Company is proposing to enter into a Heads of Agreement in relation to the Proposed Acquisition of the entire existing business and undertakings of JinJiang YangSen Garments Co.,Ltd (YangSen) including all of its assets and certain agreed liabilities ("Proposeed Acquisition")."
The wording in the attachment is however different: "that the Company has on 29 July 2015 entered into a Heads of Agreement with YangSen".
"Proposing to enter" and "has entered" are of course very different.
The announcement mentioned that XiDeLang proposes to settle the (yet to be decided) purchase amount "via cash and/ or issuance and allotment of new ordinary shares of USD0.03 each in XDL (“XDL Shares” or “Shares”) at the issue price of RM0.22 per Share".
RM 0.22 was clearly higher than the last traded share price, if the seller of the business is agreeable to receive shares of XiDeLang at such a price that looks like good news. Not surprisingly the share price of XiDeLang increased the next trading day.
Bursa decided to query the company, because the announcement was "rather devoid of details" (to put it mildly).
The company answered the queries in a rather astonishing way:
The following information regarding YangSen is currently unavailable:
- Total assets and total liabilities
- Total profit
- Name of directors and substantial shareholders
- Total contracts value secured
- Distribution networks
- Manufacturing capabilities
How is it possible to sign a Heads of Agreement to purchase a business when the most basic facts are not known? It looks like XiDeLang has not even seen the last accounts.
Why does XiDeLang announce this "non-information", why does it not wait until it has more information?
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.
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:
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:
Tuesday, 1 October 2013
XiDeLang: why does it want to raise money?
Received a comment from Imenwe about XiDeLangs announcement of a rights issue.
The "meat" of the proposal can be found here:
Lets try to dissect the parts:
- A Rights issue, which means [a] new shares and [b] money from shareholders to the company (comparable to a negative dividend); apparently it needs more money;
- Free warrants, sounds great, until one realizes that all shareholders will receive them (pro rata), and thus there is no value created; however, if at the maturity date the warrant is "in the money", all holders of the warrants should exercise them, meaning another stream of money from shareholders to the company; apparently the company needs even more money;
- Free Bonus shares, again, sounds great, until one realizes that all shareholders will receive them (pro rata); in plain English: a useless exercise which results in the cake being cut into more pieces.
The utilisation of the proceeds:
First of all, these kind of proposals cost money, in this case RM 1 Million. Not that much (given the amounts involved), but still, why waste precious money?
Secondly, the proposed utilisation is for the "D&P Centre", with a maximum amount mentioned of RM 112 million.
We would expect the company not to have enough funds, but after checking the latest accounts, is seems it actually does have ample funds:
Profit in the last quarter (RM 24M) and half year (RM 45M) were also healthy, although down compared to the year before.
That leaves one intriguing question: if XiDeLang has ample cash to pay for the new building, why does it propose the rights issue?
The company should not transfer money from shareholders (rights issue, exercise of warrants) but should instead transfer excess cash to shareholders (dividends).
The proposal seems puzzling, to say the least, and does raise enough questions.
In general: China listed companies on the Bursa Malaysia are acting in a suspicious way, on one side they are reporting healthy earnings and strong balance sheets, on the other hand they completely don't act like it.
I guess Bursa can not stop these kind of rights issues, nor can it force companies to distribute excess cash to its shareholders.
But it can stop the source of all these problems, by not allowing anymore China listed company to list on Bursa. And that is long overdue.
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