Unfair delistings

I often complained about minority shareholders in Malaysia being treated badly: relatively high IPO prices, low delisting prices, and in quite a few cases a high IPO price again at relisting.

I call it the "listing-delisting-relisting game", and some local tycoons are very good in playing it.

The main problem is the low delisting price, major shareholders wait until the price has dropped considerably, and then, under the threat of minority shareholders owning shares in an unlisted company, offer a low exit price.

In other countries things are not much better though, so it seems.

Article from Bloomberg:

"In $39 Billion China Buyout Spree, Latest Offer Angers Investors"

Some snippets (emphasis mine):


When Leo Ou Chen took his Chinese online beauty products retailer public in the U.S., investors clamored to pay $22 a share. Less than two years later, he’s offering a third of that price to buy them back.

The going-private offer for Jumei International Holding Ltd., the latest in a string of Chinese companies seeking to exit the U.S. stock market, is angering minority shareholders who say the low price benefits management to the detriment of equity owners. Chen and his partners have made a non-binding offer of $7 per American depositary share in cash, the company said on Feb. 17. They own 54 percent of the shares and have 90 percent of the voting power.

If the management-led buyout group is able to buy Jumei at such a steep discount, it will expose loopholes in the rules that are supposed to protect small investors and at the same time undermine confidence in other overseas-listed mainland companies, the minority shareholders say.

“I am angry, disappointed and disgusted,” said Ricky Zhong, an investment director at iMeigu Fund in Beijing. His firm specializes in investing in U.S.-traded Chinese companies and owns Jumei shares. “I’ve never seen so much backlash from investors for a go-private deal. Investors are hurt.”

While the offer from Chen, his co-Founder Yusen Dai and Sequoia funds is 27 percent above the average closing price over the previous 10 trading days, it is 68 percent below its initial public offering price of $22, which was above the high-end of the targeted range. Compared with its average trading during the past 90 days, the proposal is 11 percent cheaper, the second-lowest among 42 proposed going-private deals of U.S.-listed Chinese companies since January 2015, according to data compiled by Bloomberg. Only E-Commerce China Dangdang Inc. has a bigger discount of 16 percent.

Jumei held $402 million in cash or equivalent as of September, according to the latest filing. That is almost equivalent to the $467 million needed for the buyout group to acquire the remaining outstanding shares, according to data compiled by Bloomberg.

While minority shareholders are treated unfairly, they have very little influence in the going-private process, iMeigu’s Zhong said. Under the current law governing companies incorporated in the Cayman Islands, management-led buyout groups are allowed to vote on the deals. Management tends to hold controlling stakes, putting minority shareholders at disadvantage, Zhong said.

“Some people are greedy,” he said. “But it’s the flaws in the regulations that set the ugly side of human desire lose.”


Time to correct the flaws, it is long overdue.

MOL Global, Deutsche Bank's Buy recommendation

One reader has drawn my attention to a Buy recommendation on MOL Global from Deutsche Bank (dated 20 November 2014) with a 12 month price target of USD 12.

MOL's share price currently hovers around USD 0.24, 98% below the target price, in other words the price has to multiply by a factor 50 to reach the target. With the company being soon delisted, that looks rather unlikely.

It should be noted that Deutsche Bank was conflicted, but at least the company did announce that in the appendix:

Another example why readers should not take broker's research too serious. Although there might be interesting information in their reports, I personally never follow their specific buy/hold/sell recommendations.

Mol Global delisted from Nasdaq

I wrote before about Mol Global, the first Malaysian company to be listed on the Nasdaq exchange.

The company will be delisted, less than two years after its IPO. It's last traded price was USD 0.30, a 97.6% decline from it's IPO price of USD 12.50.

A good write-up including a chronology of the events that led to the delisting can be found on the website of Digital News Asia: "MOL Global’s short and bumpy Nasdaq journey".

Of interest is the last paragraph:

April 13, 2016: Announces delisting plan. Shares close at US$0.30. (Closing price on April 15: US$0.23). At such a level, this gives MOL Global a market capitalisation of US$15.5 million. In contrast and to recap, about US$75 million of the IPO proceeds went to selling shareholders.

MOL Global's share price crashes 54% (3)

MOL Global just announced its results for the third quarter:

• Consolidated revenue increased by 5.6% to MYR47.7 million (US$14.5 million) from MYR45.2 million in the corresponding period of 2013.
• Profit attributable to shareholders of MOL Global Inc. decreased 61.5% to MYR2.4 million (US$0.7 million) in the third quarter of 2014 from MYR6.3 million in the corresponding period of 2013.
• During the course of the Company's review of its financial results for the third quarter of 2014, the Company's auditor discovered that its Vietnamese subsidiary, Nganluong Joint Stock Company ("Nganluong"), which was acquired by the Company in March 2013, reported revenue from its payment business on a gross basis, and accounted for the corresponding fees payable to merchants being included in direct cost and other ancillary expenses. However, the Company's accounting policy is to account for such transactions on a net basis because the Company acts as an agent with respect to these revenue arrangements, such that the corresponding fees payable to merchants should have been netted out of revenue and not included in direct cost and other ancillary expenses.
• Two putative class action complaints have been filed against the Company and certain of its officers and directors alleging certain untrue statements and omissions in its registration statement and prospectus for the Company's initial public offering and seeking unspecified damages and other relief.

Sounds not good.

MOL Global's share price crashes 54% (2)

The nightmare of every analyst: posting a buy recommendation and immediately the share tanks due to some news.

On November 20, 2014 Deutsche came with a "Buy" recommendation for MOL Global:

And the next day already they had to come with an "Alert", although they did stick to their recommendation:

Deutsche was one of the IPO underwriters, according to SeekingAlpha.


The 40-day quiet period on underwriter analyses that began with the October 2, 2014 IPO of MOL Holdings Inc. will come to an end on November 13, allowing the firm's IPO underwriters to publish analyses of the of the company on November 14.

MOLG's share prices may see a brief rise, in response to the release of the underwriter opinions.

MOL Holdings IPO underwriters, including Citigroup Global Markets, Credit Suisse Securities, Deutsche Bank Securities, UBS Investment Bank and CIMB Securities, will seek to capitalize on the stock's recent growth through the release of positive reports beginning with the conclusion of the quiet period.


An insider informed me that the above research might have been outsourced by Deutsche to a third party research provider.

Valuation-wise, we can see from the above Deutsche link that at USD 8.86 the company was trading at an expected PE of 86 times. That has come down of course since the share price crashed.

But that would also imply that the company IPO-ed on a forward valuation of 121 times. That is if the company indeed makes a net profit of RM 21.2 Million, as forecasted.

The profit in 2013 was RM 12.2 Million, meaning that the IPO price on the realized profit was a whopping PE of more than 200 times. A sky-high valuation in which everything has to go perfect.

Good articles by "Serious Investing" on MOL Global, here and here.

I wrote before about Mark Chang (here and here), founder of Jobstreet. Mark is linked to MOL Global since he had agreed to be on the board of MOL Global.

For more information what MOL Global is doing, here is a presentation.