Published October 14, 2008

Jade investors still waiting for the answers

By CHEW XIANG

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JUST over six months ago, the botched take-over of Catalist-listed Jade Technologies was reported to the Commercial Affairs Department (CAD) by OCBC, the financial adviser to the offeror.

The white collar crime unit started to investigate, but the case is one that has fallen outside the timeline benchmarks for investigations the white collar crime buster has set for itself - three months for simple cases; six for complex ones.

This isn't a call for the police to hurry up, even though there are those anxiously waiting for the findings to surface. Rather, the length of time it's taking is testimony to the complexity of a case that has involved at least three countries and four regulatory agencies in Singapore alone.

First: to recap. The offeror, a company controlled by Jade's then group president and 46.5 per cent shareholder Anthony Soh, shocked markets on April 5 when it announced it was pulling the plug on its 22.5 cents a share takeover.

By then, OCBC had quit as financial adviser, along with Allen & Gledhill, the legal adviser. OCBC told the white collar crime unit that 'a series of events had occurred which caused us to question the integrity of the representations which we have received'.

Investors were riled. Jade's share price plunged 70 per cent on the morning trading reopened. The Singapore Exchange had to ban short-selling of the stock, a move made only once previously.

Murky events

Many said the advisers' presence was the main reason the very generous offer for the loss-making penny was taken seriously. Why did they pull out, and should that be allowed?

Dr Soh gave a partial explanation. He said that with two-thirds of his shares in Jade pledged to a failed Australian broker, Opes Prime, he was no longer able to guarantee sufficient funds were available to facilitate the offer. The shares had been pledged as security for margin loans, and repossessed by Opes's creditors.

So far, so clear. But subsequent events are a lot murkier.

For a start, Dr Soh has initiated an action in Australia's Federal Court against Opes's creditor, Merrill Lynch, as well as Opes, claiming he had been misled by Opes representatives to believe he retained beneficial ownership of the pledged shares. That means that Merrill Lynch should not have seized the shares as they were not the property of Opes to begin with.

Dr Soh is claiming the return of 300 million seized shares, plus damages.

The action is apparently still going on, although the curious move by Merrill Lynch in August to return 161.6 million Jade shares to Opes's receivers has further muddied matters.

The other foreign connection is Indonesian. Dr Soh reportedly provided his advisers with a copy of a bank guarantee letter for US$100 million from Standard Chartered Bank's Jakarta branch. Sources say doubts over the authenticity of the letter were at least part of the reason the advisers quit.

This has not been officially verified but if true, it would provide further explanation for the extended investigation.

With financial armageddon seemingly on the way, there appears little reason to bother too much about the travails of a small listed company. Yet it matters to some.

Did the advisers do their duty, and were they culpable in any way?

Was Dr Soh's offer for Jade made in good faith? (The man has since had to sell his house to build up a war chest for legal fees.)

Did Merrill Lynch act properly in first taking over the pledged shares, then selling a large block of them? Were the required disclosures made, and on time? And finally, what of the thousands of investors who rushed in to buy the stock when the offer was announced, only to lose millions when the bid collapsed?

Jade's stock has fallen to five cents, down over 75 per cent this year, even as a new management and board battle to kickstart their only operating business, a coal-mine concession in Sumatra.

Complicated affair

In June, a number of regulatory agencies here completed their investigations and passed their findings to the CAD. But for the police, the framework of a six-month timeline should be secondary to the greater task of sorting out exactly what happened and who, if anyone, was at fault.

It's a complicated affair and they will no doubt work with their accustomed thoroughness. The ongoing investigation, when completed, will clear the air. But in the meantime, all parties in the debacle are suffering.