City Developments Limited (CDL) lost its position as Singapore’s largest listed developer after its stock fell on Monday, underscoring investors’ concern about the family feud unfolding in public.
Shares of the Singapore-based developer fell as much as 7% before paring some losses before noon. They are set to close at the lowest since 2009.
Last week, CDL’s chairman and billionaire family patriarch Kwek Leng Beng sued his son and CEO Sherman Kwek, along with other board directors, accusing them of leading a coup against him. The elder Kwek also said that he has sought to dismiss his son, but was blocked from doing so by the board.
The crisis engulfing the firm has shown little sign of abating, with dueling statements coming from both sides. The tussle has prompted downgrades from analysts including those at JP Morgan and UOB Kay Hian.
On Monday, the company said in a statement that Sherman, the younger scion of the family, will remain as CEO, while business operations remain “fully functional and unaffected”.
The firm has lost about 60%, or nearly $7 billion, in market value since the younger Kwek took the helm in 2018. The stock dip on Monday means its market capitalisation is now smaller than rival UOL Group, a developer backed by Singapore’s Wee clan.
See also: ‘A fall from grace’ for CDL, says RHB, slashing TP by 35%, but major shake-up could unlock value
The dispute is another major blow to CDL, following its setback in China a few years ago when the firm wrote down a billion-dollar investment. It casts a shadow on medium-term outlook, wrote RHB Bank Singapore analyst Vijay Natarajan in a note Monday.
He changed his rating on the stock to "neutral" from "buy". “We believe the recent lapses will make it hard for long-only institutional investors to hold CDL as a part of their portfolio,” he said.
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The legal feud is set to continue this week with a closed-door case conference scheduled Tuesday. Both sides have claimed victory after an interim injunction application last week, which among other things, led to an undertaking from the two new directors not to exercise their powers until further court orders.
CDL, which was originally listed as the lead plaintiff along with the elder Kwek and other directors, was not involved in the interim injunction hearing due to “disputes as to the validity of the board resolution authorising the company to be an applicant”, according to an exchange filing from the firm Monday.
Analysts including Citi Research said that a positive resolution would be a major share price catalyst longer term, since the stock of the firm is undervalued.
Chart: Bloomberg
Read more about the developing story at CDL on our microsite:
- This week's cover story: Generational shift at City Developments
- ‘A fall from grace’ for CDL, says RHB, slashing TP by 35%, but major shake-up could unlock value (March 3)
- CDL shares down more than 5% upon trading resumption (March 3)
- Urgency of court application stems from disruption of CDL’s corporate structure; Phillip Yeo sees saga as distraction (Feb 28)
- Primary reason behind CDL’s dispute is related to M&C board advisor Dr Catherine Wu, says Sherman Kwek (Feb 27)
- CDL sees downgrades and target price cuts from analysts who still see silver linings (Feb 27)
- CDL board fight cools with undertaking from two new IDs (Feb 26)
- Sherman Kwek to remain as group CEO of CDL; finds episode 'incredibly disappointing' (Feb 26)
- Father and son battle it out in court for control for CDL (Feb 26)
- CDL calls for trading halt, cancels FY2024 results briefing (Feb 26)
- City Developments' FY2024 patmi falls 36.6% as gearing rises to 117% (Feb 26)
