Why did NOL get rapped while CapitaLand did not?
By LYNETTE KHOO
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TWO companies, two similar responses. Why did one get rapped while the other didn't?
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CapitaLand had declined to comment on Jan 7 when there were market rumours and a Dow Jones report on a potential rights issue.
Later, Neptune Orient Lines (NOL) also declined to comment on market rumours on March 10 after a Dow Jones report cited sources as saying that NOL was considering a rights issue.
Three days later, it denied outright plans of a rights issue.
The result: NOL got rapped by SGX for its boilerplate response to market rumours on a rights issue but CapitaLand didn't. This left market watchers wondering why the treatment was different when the initial responses of both companies to market rumours were the same. So what made the difference?
More light was shed on this issue yesterday. It has now emerged that CapitaLand had not made a submission to SGX when it gave a non-answer in its initial response to market rumours.
When contacted, a CapitaLand spokesperson told BT that it submitted its application to the Singapore Exchange for approval on the $1.84 billion rights issue on the same day when it made a public announcement on Feb 9.
Its real estate investment trust CapitaMall Trust (CMT) also announced a $1.23 billion rights issue on the same day.
A CMT spokesman told BT that its submission to SGX for approval of the rights issue was a confidential one but declined to say when the submission was made.
A submission for an underwritten rights issue before a public announcement is allowed under the new SGX measures that took effect on Jan 13.
A corporate finance advisor, who declined to be named, pointed to some differences in the approach taken by the two companies.
While CapitaLand declined to comment on market rumours on Jan 7, a second report by Dow Jones on Jan 23 - which said that it was mulling a rights issue to raise about $1.5 billion - apparently prompted the group to give further clarity. By then, its share price had plunged some 24 per cent.
The advisor felt that there is reason to give benefit of the doubt for CapitaLand. When CapitaLand first responded to market rumours on Jan 7, it might not have concrete plans yet. Over time, it may have narrowed down its options and been ready to disclose them in response to a second Dow Jones report on Jan 23.
If CapitaLand had said 'no comments' the second time, that would probably have triggered a reprimand from SGX, he said.
NOL was publicly reprimanded by SGX this week for not being 'sufficiently frank and explicit' enough in its response on March 10.
An issue manager who declined to be named said that the NOL episode was 'very unfortunate as somebody got to be the punching bag'.
Speculation was rife that NOL would carry out a rights issue after Dow Jones cited two people familiar with the situation that NOL was considering a rights issue of more than US$250 million to boost its capital base. This sent its shares into a tailspin, falling below a dollar mark.
In such a situation which could suggest possible leakage, 'to say something akin to not commenting on market rumours is not correct', said the corporate finance advisor. The advisor felt that perhaps NOL should have responded in the same manner as CapitaLand did in its second response.
Industry watchers felt that the hard stance taken by SGX in NOL's case reflects its concern over any potential leakage of material information before a public announcement is made.
But some observers felt that more can be done, such as having in place financial penalties for repeated or serious disclosure breaches, possibly incorporating a scheme where the quantum can rise exponentially.
Robson Lee, partner at Shook Lin & Bok LLP noted that all major transactions, be it rights issues, general offers or M&As, are susceptible to information leakage, given the number of parties involved - from company representatives, lawyers, financial advisors, bankers to investor relations consultants.
Even in a private share placement that involves fewer parties, there is still the risk of leakage when companies shop for placement agents, underwriters or share placees, he said.
'The guiding principle is always to announce any major plans that companies may have and if details of the plans are not sufficiently concrete at the time, to say that details will follow in a subsequent announcement,' added Yang Eu Jin, director of KW Capital.
'That should be the antidote to any market rumours,' he said.
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