Awantec’s share price fell sharply by more than 20% in the week immediately after its suspension was announced. When the upliftment was approved, its share price rose sharply on the first day of resumption of trade, by nearly 55%. Its share price has continued to rise since then.
Here is the issue. Yes, Bursa acted within its powers in the situation — it has discretion over whether to extend the submission deadline, and approve or reject any regularisation plan. But did it also safeguard the interests of the investing public in this case? More critically, the process itself lacked transparency and appeared inconsistent. For example, ACME Holdings was in a similar, if not exactly the same, position.
ACME triggered Paragraph 8.03A (2)(b) of the Main Market Listing Requirements when its revenue fell below 5% of its share capital in June 2022 and hence, had insignificant operations. The company submitted an application for waiver and upliftment (self-regularisation) of affected issuer status just before the deadline for submission of the regularisation plan, which was Dec 29, 2023. It also applied for a six-month extension should the waiver be rejected. In this case, Bursa did not announce any suspension of its shares pending a decision on ACME’s application for self-regularisation. The application was ultimately accepted, and its affected issuer status was lifted on April 1, 2024.
The question we have is why were Awantec’s shares suspended pending a waiver-upliftment decision while that of ACME was not. Obviously, we don’t know what transpired in all the communications between Bursa and the two companies. Like we said, the situations are similar but not exactly the same. We, and the public, may not be privy to certain nuances. But the fact is some Awantec investors lost a lot of money while others made a lot in the few weeks of volatile share prices — that perhaps could have been avoided, for instance if the suspension announcement had been delayed for three more weeks, to after a decision on the waiver-upliftment application had been made. Remember, Bursa’s primary objective is to safeguard the interests of the investing public. Perhaps the process could also be made clearer, so that both the affected companies and the public are not caught off guard.
We would go one step further and ask whether Paragraph 8.03A itself, as a rule, serves its purpose of protecting the shareholders of these companies. How does it protect the small shareholders? When a company loses its core business, for whatever reason, Bursa places it under Paragraph 8.03A — with the same stringent requirements for regularisation as a financially distressed company under PN17. Ultimately, a company that cannot find another core business gets delisted. So small shareholders either must sell at huge losses or end up with an unlisted company with hardly any business. How does this rule help them?
In the past, these companies simply became public shell companies and at some stage, someone would undertake a reverse takeover and voila, they and their shareholders were made whole again. Much like what a special purpose acquisition company does in the US — a shell company waiting for an asset injection. Is this not better?
Plus, after a regularisation plan has been submitted, how does Bursa come to a decision whether to reject or approve it, and therefore either delist or uplift the affected issuer status? Is it equipped to ascertain if a new business is viable, sustainable and has growth prospects? The fact is, one never knows for certain.
And how does Bursa determine whether or not to extend the time allowed for a plan submission? Is there a limit on the number of extensions a company can request for? There are quite a few affected issuers that have yet to submit any plans at all, some for years since triggering the classification (see Table).
If the balance sheet of a PN17 company has negative shareholders’ equity and is made whole by capitalising the monetisation of future cash flows of say, a subsidiary, does that qualify? Is it sufficient for upliftment? Is there a change in the fundamental business? Over to you, Bursa.
The Malaysian Portfolio gained 4.1% for the week ended June 12, outperforming the FBM KLCI, which remained largely unchanged. The top gainers were KSL Holdings (+14.4%), Insas Bhd – Warrants C (+13.7%) and Insas (+7.6%), while the losers were IOI Properties Group (-1.2%) and Malayan Banking (-0.2%). Last week’s gains lifted the total portfolio returns to 221.2% since inception. This portfolio is outperforming the benchmark index, which was down 12.1%, by a long, long way.
The Absolute Returns Portfolio finished the week lower, down by 0.5%, paring total returns since inception to 2.8%. It was dragged down by top losers such as Swire Properties (-6.1%), SHK Properties (-3.8%) and Airbus (-2.7%), but the losses were partially offset by gains from top performers such as Microsoft (+4%), Itochu (+2.2%) and Vanguard S&P 500 ETF (+1.2%).
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