Published May 15, 2009

A case of Noble having to call a trading halt earlier

By OH BOON PING

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ON TUESDAY, Noble Group said it was raising net proceeds of about $125.5 million by placing out 84.7 million new shares at $1.52 each. This came in the midst of a bid by the commodities trading group to take over Gloucester Coal and some felt that the share placement would boost its arsenal for the acquisition plan.

But more notable than the share issue is the fact that Noble's stock exchange filing came only a day after a wire agency reported the planned share exercise.

Citing a term sheet it had obtained, Reuters reported late on Monday that Noble was raising US$200 million in a top-up share placement priced at a discount to the stock's Monday closing price.

When there is an apparent leak of information ahead of a price-sensitive announcement, prudence dictates that the company concerned make an immediate request for a share trading halt while it races to make the stock exchange filing.

But in Noble's case, the request for a trading halt came much later, and only after its share price had plunged by some 15 per cent to a low of $1.41 in early trading the following day. When the announcement finally appeared on the Singapore Exchange (SGX) website, news of the placement had been out for at least half a day without any official confirmation.

From the investor's perspective, it is fair to ask: why was it so difficult for Noble to provide timely information to the market, especially given the manageable size of the issue, which is relatively small compared to the existing 3.2 billion shares already out in the market?

Plus, in a disclosure-based regime, timeliness of disclosure is a principle that all listed companies should pay heed to. Therefore, Noble should not have dallied so long.

Granted, the company might not have worked out all the details of the placement before the market opened on Tuesday, and therefore chose not to make an announcement right away. But even if that were the case, the management could still have called for a halt before trading opened on Tuesday, instead of letting speculation boil over for nearly two hours. Within that time, those who knew sold the shares down, leaving those who didn't know to ponder the plunge.

In terms of timely and proper disclosure, it was definitely a poor show by Noble, whatever the merits of the exercise.

The second issue concerns the disclosure that Noble's biggest shareholder - Noble Temple Trading (NTT) - was selling 36.3 million existing shares concurrently with the placement exercise.

Reuters had reported on Monday that NTT 'was selling the shares ahead of the placement'. While the vendor share sale constitutes a mere 3 per cent of NTT's stake, the Reuters report had prompted the question of whether NTT - if it was privy to the placement plans - was attempting to offload those shares ahead of any adverse market reaction to the news.

This was a fair question, given the Reuters report. But when asked for more details on the NTT sale, Noble did not respond to the media query, even though it made a stock exchange filing two days later on NTT paring its stake on Wednesday from 33.6 per cent to 32.5 per cent.

The silence wasn't reassuring at all. Shouldn't the management be quick to quash talk of possible insider trading?

Noble, which has been credited for its high level of financial disclosure, let investors down with its handling of the placement exercise. The group should be reminded that sharing material information with investors in a timely manner is critical to building up strong long-term relationships with shareholders.