Published November 10, 2008
Must minorities just take it or leave it?
By CHEW XIANG
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IN A disclosure-based regulatory regime, a question at the back of the minds of many minority shareholders is often 'What next?'. So long as nothing untoward happens that should catch the attention of the authorities, there is not much that unhappy minority shareholders can do except to sell out, even if there is evidence of poor management or weak corporate governance, or if board decisions go against their perceived interests.
Take the example of Catalist-listed E3 Holdings, which is in real estate in China. On Tuesday, it held its annual general meeting, a rambunctious six-hour affair during which an angry bloc of shareholders tried desperately to oust the company's chief executive officer, Jonathan Ow, and chairman, Peter Ngo, and to keep their candidate director Liau Beng Chye on the board.
Among the facts revealed at the meeting were:
# that $22.2 million - more than the company's entire market capitalisation - had been sent to two bank accounts in China controlled by Ken Ngo, brother of Mr Ngo, but that no bank statements were ever shown to the auditors (statements were only obtained the day before the AGM);
# Mr Ken Ngo had received travel advances of $167,000, which the auditors could not document to their satisfaction (he is apparently undertaking to repay the sum);
# That he had also, while a general manager of the company's subsidiary, paid $334,600 to a company whose services were terminated after just a few months, and which was said to be controlled by his associate (the fees were stipulated in the contract and approved by another director);
# And, that the company had embarked on numerous 'promising' ventures in the past three years without any result, while losing over $6 million in its last fiscal year (doing business in China is just plain tough).
To their credit, CEO Mr Ow and chairman Mr Ngo kept their cool despite considerable provocation and frequent heckling. Their testimonies to shareholders were frank and full and there is no evidence that any laws or relevant regulations were broken.
But at the very least, the company's actions show that its internal controls were seriously lacking. As more than one professed 'neutral' shareholder at the meeting said: 'I can't believe this sort of thing is happening in a Singapore public listed company.'
Yet, in the end, both Mr Ow and Mr Ngo kept their seats on the board by a comfortable margin of the votes polled, while Mr Liau was booted out, even though he had the support of Armorcoat International, the single largest shareholder of the company with some 7.4 per cent of the shares.
His party angrily left when they realised their revolt had failed. What else could they do? As one shareholder, supportive of the company's management, said: 'If they don't like it, they can just sell their shares.'
Another example: Addvalue Technology, in the satellite communications business, on Monday announced a deal to raise up to $94.6 million in cash, placing out up to 51.56 per cent of the company by issuing 860 million new shares to a Cypriot investment firm. The deal values the company at a generous 90 times historical earnings (it made about $2.2 million last fiscal year, on revenue of $10.7 million).
So the deal is likely to be great for the company, which will, once necessary approvals are obtained, get at least $38 million in the first phase of investment to fund its capital expenditures.
But this may not be a good deal for minority shareholders. If it goes through, they won't get a cent in terms of an offer, since Addvalue is seeking a whitewash resolution so that no takeover offer needs to be tabled. Worse, their holdings will see a 50 per cent dilution, with no indication at present that the company's performance will improve dramatically. Again, their only option is to sell out.
In theory, the fortunes of shareholders should always be tied to that of their company. But in practice, it's possible for majority shareholders with control of management to take the company down a road that diverges from the interests of minority shareholders. The only solace they have is to chalk it down to tough luck.
Monday, 10 November 2008
Published November 10, 2008
WALL STREET INSIGHT
Traders are in for another roller-coaster ride
By ANDREW MARKS
NEW YORK CORRESPONDENT
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IF investors were hoping that the tentative return to function - if not full health - of the credit markets would signal a bottom for the bear market and bring some much-needed stability to the US stock market, they found that they were sorely mistaken last week.
Although some of the record-high volatility that has plagued the markets the past two months receded as the commercial paper market - which businesses tap for the shortest of short-term loans to fund day-to-day cashflow needs - has thawed, the dark clouds of uncertainty and fear remained firmly in place, and forecasts call for more stormy trading sessions ahead.
Stock market strategists warned, in fact, that the coming weeks will likely remain highly volatile and the major US market indexes will again threaten to break into ever lower territory as the extent of the damage to the economy here and abroad unfolds.
'All that's really happened at this point in the stock market is that we've traded one set of concerns for another,' said Hugh Johnson, chief investment strategist at Johnson Illington Advisors. 'The actual fear that the credit crisis might cause an outright collapse of the global financial system has receded markedly since the massive government interventions to recapitalise the major banks, and that's been a big relief, obviously.'
But he observed: 'Now, we're just starting to see the first concrete signs of the terrible damage that the financial crisis has wrought on the economy, and the market is reacting strongly to the indications that show we're in for a very difficult time here.'
Difficult indeed. The release of the October jobs report last Friday stunned Wall Street by coming in significantly weaker than economists' already glum expectations. They showed a labour market already in trouble, and with job cuts spreading throughout almost all sectors of the economy, they were a sign that the unemployment rate is likely to rise well above the 6.5 per cent rate that it recorded last week, its highest reading since March of 1994.
'The biggest problem for stock market investors that the ugly data we received last week poses is not how bad a situation we're in, but how much worse it's going to get,' said money manager Paul Krieg, who runs a large cap domestic equity fund for Seville Investments.
He was referring to both the jobs report and glum data on the services and manufacturing sector, and a horrible retail sales report boding ill for the holiday shopping season, also released last week.
'The problem is nobody really knows, and when you've got that kind of uncertainty looking three to six months out, on top of having a credit market that's still unhealthy and a long list of major companies, like GM and Chrysler, that are still in danger of going under, the only people willing to dip their toes in the water right now are short-term trading-oriented investors, who pull their money out as quickly as they put it in,' said Mr Krieg, who added that he is keeping a very high proportion of his fund's money in short-term debt and cash, where it has been for the last few months.
'I see nothing on the horizon that would convince me we're going to emerge from a bear market anytime soon,' he said.
Even the solid bounce-back that stocks enjoyed last Friday following two awful days of selling did little to encourage Wall Street traders.
'Today's action was just one in response to an oversold condition after a 10 per cent drop in just two days,' said Mr Krieg, referring to the biggest two-day sell off in the history of the Dow Jones Industrial average that occurred last Wednesday and Thursday. 'It's hardly as though we got any good news.'
In fact, the bluechip index rose 248.10 points, or 2.9 per cent, to close at 8,943.89, even as the jobs report showing 240,000 new layoffs came out and GM announced a US$2.5 billion loss for the third quarter and said that it may have to halt assembly lines to deal with a cash shortfall. The Standard & Poor's 500 index also gained 2.9 per cent, while the Nasdaq added 2.4 per cent.
For the week, all three major market indexes lost just about 4 per cent.
The coming week is unlikely to be as difficult to bear, with a light schedule of economic data, and the disastrous third-quarter earnings season limping to a close. But investors will be on the lookout for new indications of how president-elect Barack Obama intends to address the severe economic downturn.
Last Friday, following a meeting with economic advisers including former Fed chief Paul Volcker and former Treasury secretary Lawrence Summers, Mr Obama promised that 'immediately after I become president, I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families and restore growth and prosperity'.
Mr Summers and Mr Volcker are among the reported favourites for roles high up in Mr Obama's administration, as is Timothy Geithner, current president of the New York Fed. Appointments of any of those three would be welcomed by Wall Street, as would concrete signs of the economic stimulus plan that Mr Obama is reportedly discussing with congressional leaders and President George W Bush.
Although few companies are left to report earnings in a season that has seen a 14 per cent profit contraction thus far, several major retailers - a sector expected to bear a significant brunt of the impact of the recession - will report earnings, including Wal-Mart Stores Inc, Starbucks, Nordstrom and Penney. Beleaguered insurer AIG is also expected to report today, as is Microsoft tomorrow.
WALL STREET INSIGHT
Traders are in for another roller-coaster ride
By ANDREW MARKS
NEW YORK CORRESPONDENT
Email this article
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Feedback
IF investors were hoping that the tentative return to function - if not full health - of the credit markets would signal a bottom for the bear market and bring some much-needed stability to the US stock market, they found that they were sorely mistaken last week.
Although some of the record-high volatility that has plagued the markets the past two months receded as the commercial paper market - which businesses tap for the shortest of short-term loans to fund day-to-day cashflow needs - has thawed, the dark clouds of uncertainty and fear remained firmly in place, and forecasts call for more stormy trading sessions ahead.
Stock market strategists warned, in fact, that the coming weeks will likely remain highly volatile and the major US market indexes will again threaten to break into ever lower territory as the extent of the damage to the economy here and abroad unfolds.
'All that's really happened at this point in the stock market is that we've traded one set of concerns for another,' said Hugh Johnson, chief investment strategist at Johnson Illington Advisors. 'The actual fear that the credit crisis might cause an outright collapse of the global financial system has receded markedly since the massive government interventions to recapitalise the major banks, and that's been a big relief, obviously.'
But he observed: 'Now, we're just starting to see the first concrete signs of the terrible damage that the financial crisis has wrought on the economy, and the market is reacting strongly to the indications that show we're in for a very difficult time here.'
Difficult indeed. The release of the October jobs report last Friday stunned Wall Street by coming in significantly weaker than economists' already glum expectations. They showed a labour market already in trouble, and with job cuts spreading throughout almost all sectors of the economy, they were a sign that the unemployment rate is likely to rise well above the 6.5 per cent rate that it recorded last week, its highest reading since March of 1994.
'The biggest problem for stock market investors that the ugly data we received last week poses is not how bad a situation we're in, but how much worse it's going to get,' said money manager Paul Krieg, who runs a large cap domestic equity fund for Seville Investments.
He was referring to both the jobs report and glum data on the services and manufacturing sector, and a horrible retail sales report boding ill for the holiday shopping season, also released last week.
'The problem is nobody really knows, and when you've got that kind of uncertainty looking three to six months out, on top of having a credit market that's still unhealthy and a long list of major companies, like GM and Chrysler, that are still in danger of going under, the only people willing to dip their toes in the water right now are short-term trading-oriented investors, who pull their money out as quickly as they put it in,' said Mr Krieg, who added that he is keeping a very high proportion of his fund's money in short-term debt and cash, where it has been for the last few months.
'I see nothing on the horizon that would convince me we're going to emerge from a bear market anytime soon,' he said.
Even the solid bounce-back that stocks enjoyed last Friday following two awful days of selling did little to encourage Wall Street traders.
'Today's action was just one in response to an oversold condition after a 10 per cent drop in just two days,' said Mr Krieg, referring to the biggest two-day sell off in the history of the Dow Jones Industrial average that occurred last Wednesday and Thursday. 'It's hardly as though we got any good news.'
In fact, the bluechip index rose 248.10 points, or 2.9 per cent, to close at 8,943.89, even as the jobs report showing 240,000 new layoffs came out and GM announced a US$2.5 billion loss for the third quarter and said that it may have to halt assembly lines to deal with a cash shortfall. The Standard & Poor's 500 index also gained 2.9 per cent, while the Nasdaq added 2.4 per cent.
For the week, all three major market indexes lost just about 4 per cent.
The coming week is unlikely to be as difficult to bear, with a light schedule of economic data, and the disastrous third-quarter earnings season limping to a close. But investors will be on the lookout for new indications of how president-elect Barack Obama intends to address the severe economic downturn.
Last Friday, following a meeting with economic advisers including former Fed chief Paul Volcker and former Treasury secretary Lawrence Summers, Mr Obama promised that 'immediately after I become president, I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families and restore growth and prosperity'.
Mr Summers and Mr Volcker are among the reported favourites for roles high up in Mr Obama's administration, as is Timothy Geithner, current president of the New York Fed. Appointments of any of those three would be welcomed by Wall Street, as would concrete signs of the economic stimulus plan that Mr Obama is reportedly discussing with congressional leaders and President George W Bush.
Although few companies are left to report earnings in a season that has seen a 14 per cent profit contraction thus far, several major retailers - a sector expected to bear a significant brunt of the impact of the recession - will report earnings, including Wal-Mart Stores Inc, Starbucks, Nordstrom and Penney. Beleaguered insurer AIG is also expected to report today, as is Microsoft tomorrow.
Published November 10, 2008
Marina IR will go on: MM Lee
By JAMIE LEE
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(SINGAPORE) The US$4.5 billion Marina Bay Sands integrated resort project in Singapore will go on, said Minister Mentor Lee Kuan Yew.
This comes on the back of growing concerns that the casino project could be in jeopardy after the parent company said last week it was looking at a capital raising.
'The Sands integrated resort is under pressure,' MM Lee told Tanjong Pagar residents at a community event yesterday, adding that the company was highly-leveraged as it expanded to places such as Macau.
The Chinese have now restricted the number of people who can go to Macau and this has caused the company's share price to decline, he said.
'But in Singapore, that project will go on because we are not depending on China and Chinese workers coming in from the rest of China to visit our integrated resorts.'
Las Vegas Sands chairman Sheldon Adelson had told the local media last week that he felt the need to 'personally reaffirm our commitment to the success of Marina Bay Sands'.
Mr Adelson - who injected US$475 million of his own money into the company recently - also revealed that he had met with Singapore government officials on a range of subjects such as the pace of construction and marketing efforts with the Singapore Tourism Board.
The Marina Bay resort is expected to hire some 10,000 workers before it begins operations next year. The three local banks' exposure to the project is said to be around $2.2 billion.
Marina IR will go on: MM Lee
By JAMIE LEE
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(SINGAPORE) The US$4.5 billion Marina Bay Sands integrated resort project in Singapore will go on, said Minister Mentor Lee Kuan Yew.
This comes on the back of growing concerns that the casino project could be in jeopardy after the parent company said last week it was looking at a capital raising.
'The Sands integrated resort is under pressure,' MM Lee told Tanjong Pagar residents at a community event yesterday, adding that the company was highly-leveraged as it expanded to places such as Macau.
The Chinese have now restricted the number of people who can go to Macau and this has caused the company's share price to decline, he said.
'But in Singapore, that project will go on because we are not depending on China and Chinese workers coming in from the rest of China to visit our integrated resorts.'
Las Vegas Sands chairman Sheldon Adelson had told the local media last week that he felt the need to 'personally reaffirm our commitment to the success of Marina Bay Sands'.
Mr Adelson - who injected US$475 million of his own money into the company recently - also revealed that he had met with Singapore government officials on a range of subjects such as the pace of construction and marketing efforts with the Singapore Tourism Board.
The Marina Bay resort is expected to hire some 10,000 workers before it begins operations next year. The three local banks' exposure to the project is said to be around $2.2 billion.
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