Trade Shares or Stocks in Bursa Malaysia|How to start Trading | Trade Stocks in Bursa Malaysia | How to Open Trading Account | How to Open CDS Account | What is Collateralised Trading | Discretionary Financing | Share Margin Financing | CDS Share Transfer | Securities Borrowing and Lending (SBL) | Regulated Short Selling (RSS) | Brokerage | Internet Trading Brokerage Discount | Cash Upfront Brokerage Discount | Clearing Fees | Contract Stamp Duties | Bursa Malaysia | Composite Index | Bursa News | Listed Companies News | Market News | Market Outlook

A wider moratorium on the sale of shares is being applied on new listings of China companies on Bursa Malaysia.

Investment banks sponsoring the new IPOs, in consultation with the Securities Commission (SC), have initiated the move which imposes at least a six-month moratorium not only on the promoters of the company – which has been the usual practice – but also on a list of other shareholders who have emerged prior to the IPO.

It is aimed at preventing a repeat of the heavy selling by a pre-IPO investor in one of the three listed Chinese companies.

This will be the first time a moratorium is placed on shareholders other than promoters of the listed company, in the context of listings of Bursa Malaysia, a party familiar with the situation said.

He added that the SC had the authority to widen the scope of the moratorium in the event it discoverd that there was a significant number of other parties (other than the promoters) who had invested in the company prior to its IPO.

The decision to do also suits a peculiarity of Chinese firms seeking a listing here.

A look at the prospectus of soon-to-be-listed Sozo Global Ltd reveals a long list of individuals who will be selling some of their shares as part of the IPO offering.

Many of these individuals are Malaysians or Singaporeans who have acted as consultants, guiding Sozo on their listing exercise here. It is understood that these consultants have been paid mostly in shares of the company.

Hence, it is only expected that these individuals are entitled to sell some of their shareholding at the IPO.

However, the investment banks and the SC have ensured that these individuals along with other pre-IPO shareholders will not be allowed to sell the bulk of their shares for at least six months.

“Some of them are ex-investment bankers whose business model is to now prepare and guide companies from China for listings in Singapore and Malaysia,” said a source.

However, it is noteworthy that in Sozo’s case, these individuals are only selling under a quarter of their shareholding, as the rest of their shares are locked up under the moratorium.

The basis of the expanded moratorium is that any shareholder who has invested in the entity being listed, prior to its IPO, has acquired those shares at a price lower than IPO investors.

Indeed, the entry cost of these shareholders is also revealed in the prospectuses.

Hence, allowing these earlier investors to sell into the market soon after the company is listed would be detrimental to investors who had just participated in the IPO exercise.

To recap, that is the fate that befell Multi Sports Holdings Ltd, one of the Chinese shoe makers listed here. Tan Sri Quek Leng Chan’s GuoLine Group Management Co Ltd had significantly sold down its holdings in the Chinese company soon after its IPO. GuoLine was a pre-IPO investor in Multi Sports.

However, it is left to be seen if this expanded moratorium will be sufficient to get institutional funds to buy the pending Chinese company IPOs as placees at the prices its promoters’ want.

But a party close to the IPO placement effort of Sozo Global said the firm was close to securing the investors for the exercise.

Related Posts:

• Chinese company Xidelang to list in Bursa
• Bumi Armada make big Entry
• Another Ananda’s listing – Bumi Armada IPO
• IPO – UOA Development Bhd
• IPO – Berjaya Food

AS THE debate on takeover rule changes heats up, a corporate lawyer argues that the role of independent advisers can be boosted instead to protect small investors and help them get a higher offer price. SC proposal to review the take over code after the announced take over of EON Capital Berhad (holding company of EON Bank) by Hong Leong Bank via acquisition of assets and liabilities instead of acquisition via the listed entity.

Sreesanthan Eliathamby, a partner of law firm Kadir Andri & Partners, who has in the past advised on several major transactions in the country, said there are other more effective ways to achieve a better price for minority investors in a merger and acquisition (M&A) deal, rather than tightening the rules outright.

“For example, you can expand the role of independent financial advisers to ensure that the advice given is more granular and assist the minority in making an informed decision,” Sreesanthan told Business Times in an interview in Kuala Lumpur yesterday.

“If the price difference between what the independent adviser has recommended and the offer is more than 10 per cent, the regulator can require that the deal cannot go through,” he suggested.

He said the Securities Commission (SC) should look into these alternatives because a tougher rule will immediately drive away potential buyers on impression that a deal is harder to be done, and yet there is no guarantee that minorities will get a higher offer once the bar is raised.

“We must be clear on the rationale for raising the shareholder’s approval threshold. Is it for uniformity, or the perception of shareholder democracy or pricing? If it is pricing, then my view is that it is better achieved in other ways,” he added.

Last month, the SC said it plans to close the gap among different rules that govern takeover activities. The regulator has put up a set of consultation paper on this where the public has until today to respond.

Among the proposed changes are that a company planning to sell off its key assets must get the approval of at least three-quarters of its shareholders. The plan can also be blocked if at least a tenth of shareholders votes against it.

K&N Kenanga Holdings Bhd group director Tengku Zafrul Aziz said the veto rights given to the minority shareholders who own just more than 10 per cent of a company is unfair to other owners.

“This only protects the minority, but all shareholders have their rights too. This is too onerous for any company because why would you need a majority stake if you can practically control the company with slightly more than 10 per cent?” Zafrul told Business Times when contacted.

On the existing regulation gap on various methods to take over a company, Sreesanthan argues that each route has in itself the check and balance to ensure sufficient investor protection.

“People think that when the proponent wants to take a company private, they will sit down to see which route requires the lowest approval threshold to get through. This is not true in real practice.”

He said some opted for the assets and liabilities sale method because the potential buyer can do due diligence on the target company’s assets before presenting the offer. In comparison, buyers cannot do a due diligence on takeover offers under the Takeover Code, and hence, the offer price will be lower to provide for any surprises.

The asset and liabilities sale route also gives flexibility to the target company to stay listed and find another investment once the existing assets are sold, and not necessarily delist the company as in the case of a takeover.

Related Posts:

• EONCap Shareholders say Yes for sale of EON Bank
• EONCap sequel: EGM on 19 August
• EONCap Saga continues : Proceed with EGM
• EONCap to issue notice to shareholders
• EONCap board approved submission offer to shareholders