Best World

[brattzz]

i wonder how long this will drag out? :O
BW makes it seems like something is done, but sgx seems to think nothing is done at the same time... :O

[Wildreamz]

Legal issues aside, efficacy of their products aside (I only believe in health claims verifiable by peer-reviewed papers, and randomized controlled trials), multi-level marketing always seems like a poor deal for stakeholders in particular (only the top reaps all the benefit) and society in general.

I would never touch this with a 10-foot pole.

[dreamybear]

I am grateful to fellow buddies who voiced their thoughts. dreamybear feeling helpless and demoralized, as least some discussions help to boost morale while waiting for trading resumption. I have written to RegCo several times already. Thanks for all the recent posts, I will try to share my thoughts on some of them :

@weijian : previously, I adopted a buy and hold strategy for my holdings. However, I feel times are different now. We are in an age of disruption and an era of rapid change, not only in the area of technology, but it is also getting more uncertain in terms of world politics. For e.g. a successful company may get disrupted, or WB selling his long time holding of Wells Fargo shares. In BW's case, BW seems to be shifting towards a DS model in China. It means I have to re-evaluate my position on BW. But with the ongoing suspension, I cannot sell. 

@Big Toe : I think BW's huge success in China is partly "circumstantial" - right business, right audience(more successful in lower tier cities), albeit years of planning. In SG, we don't see DS being a popular "career choice". I agree doing business in China is complex, and not forgetting those S-chips sagas or even news reports on people setting up a fake bank branch in china. Reading the BW China report/independent review, I am not sure whether it is because of business practice "prudence" that BW has to make certain business decisions. On repatriation of profits, I remembered BW's mgmt saying it is not a problem for them.

@brattzz : Your guess is as gd as mine. I feel there should be a firm deadline set to it, or else there should be an exit offer, as in Marissa Lee's article*(perhaps a "farewell present" for BW shareholders as she seems to have left BT). Take the case of Hyflux's court-supervised moratorium, which lasted for more than two years. Although BW's case is different from Hyflux, as a shareholder, I am uncertain what will come out of the long suspension - assuming there isn't any breach of regulations or fraud, shareholders would have waited so long for ???

*https://www.businesstimes.com.sg/companies-markets/best-world-founders-should-make-exit-offer-to-minority-shareholders

I would liken the undertaking to SMART goals in pjt mgmt, among other things measurable and specified timeline. Till now, I am curious what percentage of the review / resumption proposal has been satisfied ? What must happen for trading to resume - how many of the checklist items are outstanding ?

@Wildreamz : There are certain risks in DS, and there are unpleasant incidents in the industry. However, I do think some DS companies offer decent products that works, e.g. BW and Nuskin. I think before investing, it would be good if one have tried their products or know of several people who have tried or are regular users of their products. Not all companies are created equal, but I think the right company at the right price is still a decent(not perfect) investment, for e.g. 

Nuskin : 18 years of consecutive dividend increase
( https://nuskinenterprisesinc.gcs-web.com...2b779678d5 )

An investor shared his BWI journey in the article :
https://www.nextinsight.net/story-archiv...road-ahead

Lessons Learnt
I feel there is no organization to provide a voice for the voiceless minority shareholders. Should the circumstances in BW be left for the market to decide like the laissez-faire theory, unless there is fraud or breaches in regulations ? Shouldn't it be left to the buyers / sellers to decide on the share price in the open market, with the ongoing issues ? Are shareholders' concerns being heard ? What recourse do shareholders have ? any advice will be welcome.

Moving fwd, I think I will be more comfortable investing in a company where there are substantial shareholders who have the resources to unite the minority shareholders, like in the case of Challenger.

[weijian]

@weijian : previously, I adopted a buy and hold strategy for my holdings. However, I feel times are different now. We are in an age of disruption and an era of rapid change, not only in the area of technology, but it is also getting more uncertain in terms of world politics. For e.g. a successful company may get disrupted, or WB selling his long time holding of Wells Fargo shares. In BW's case, BW seems to be shifting towards a DS model in China. It means I have to re-evaluate my position on BW. But with the ongoing suspension, I cannot sell. 

hi dreamybear,

Let me clarify here. We have to invest with a "buy and hold" mentality but that doesn't mean we adopt the "buy and hold" action. There is a world of a difference between both.

The "buy and hold" mentality acknowledges that the world changes. Hence, it looks for things that don't change to invest in. It looks for competitive moats (network effects, high switching costs, lowest cost producer etc). Because I am going to "buy and hold", the hurdles towards making the investment are much higher and one is less "trigger-happy". "Buy and Hold" differentiates the signal (what has really changed) and the noise (market gyrations).

The "buy and hold" action itself is meaningless. It is actually an euphemism for someone who wants their capital to work for them, but yet not willing to put in the effort to do the necessary to preserve their capital.

To sum it up - "buy and hold" is a principle. it is not a method.

P.S. We have always been in an age of disruption, age of rapid change, uncertainty in world politics or "whatever you want to put in here". Since the Renaissance and Industrial Revolution, from 1800s, the world has moved at a fast pace and it has always been like that for the past 200 years. Ask JD Rockefeller, who witnessed both horse carriages and mechanical cars, back in 1920 how he feels about disruption/rapid change/uncertainty in politics, and he will probably feel similar.

[Wildreamz]

@weijian: Disruption and progress has happened throughout the ages; but no doubt, it's getting way faster.



@dreamybear: Investing in microcap (<US$100mil) always had outsized associated risks (competition, regulations, financial irregularities etc.); hence, position sizing is very important if you have to invest in such companies, in general. Too much focus had been put on the sales tactics, instead of the actual product (is it competitive? is there a moat? etc.) by investors IMO.

[dreamybear]

I am thankful for the latest update as it provides the much needed clarity(of the resumption status) to shareholders. 

It seems that the condition for trading resumption is very much dependent on the China DS licences.

I am puzzled on one thing.

BW mgmt has previously sought advice from law firm that its current China franchise model is in compliance with laws and regulations. But after the review and SGX discussions, it seems BW has to convert to DS to meet the requirements. 

So in this case, does it mean there is a business decision "error" by BW mgmt ?

=======================

" The Company wishes to inform Shareholders that, following consultation with SGX RegCo, the Company believes that the suspension of the trading of the Company’s shares will continue until the Group is able to make progress on its transition to a direct selling model in China, as SGX RegCo continues to have some regulatory concerns on the Group’s current sales and distribution model in China, which the Company has been seeking to address.

The Company has been advised by its legal counsel as to the laws of China that, as of the date of this announcement, MOFCOM has not resumed accepting applications for direct selling licenses and accepting filings for expansion of the coverage of existing direct selling licenses. No update has been provided by MOFCOM on this matter since the December 2020 Status Update. Accordingly, the Group is unable at this time to file for the expansion of the coverage of its existing Direct Selling License. "

https://links.sgx.com/FileOpen/2021%2003...eID=652190

---------

"Shareholders should also note that the Company had announced on 9 May 2019 that it had developed the Franchise Model with advice from its professional advisors, and had obtained an opinion from Beijing Dacheng Law Offices, LLP (part of the global law firm Dentons) following review of the information provided, that the Group’s business under the Franchise Model is in compliance with applicable laws and regulations."

https://bestworld.listedcompany.com/news...S4D7.1.pdf

[DCF]

I am thankful for the latest update as it provides the much needed clarity(of the resumption status) to shareholders. 

It seems that the condition for trading resumption is very much dependent on the China DS licences.

I am puzzled on one thing.

BW mgmt has previously sought advice from law firm that its current China franchise model is in compliance with laws and regulations. But after the review and SGX discussions, it seems BW has to convert to DS to meet the requirements. 

So in this case, does it mean there is a business decision "error" by BW mgmt ?

=======================

" The Company wishes to inform Shareholders that, following consultation with SGX RegCo, the Company believes that the suspension of the trading of the Company’s shares will continue until the Group is able to make progress on its transition to a direct selling model in China, as SGX RegCo continues to have some regulatory concerns on the Group’s current sales and distribution model in China, which the Company has been seeking to address.

The Company has been advised by its legal counsel as to the laws of China that, as of the date of this announcement, MOFCOM has not resumed accepting applications for direct selling licenses and accepting filings for expansion of the coverage of existing direct selling licenses. No update has been provided by MOFCOM on this matter since the December 2020 Status Update. Accordingly, the Group is unable at this time to file for the expansion of the coverage of its existing Direct Selling License. "

https://links.sgx.com/FileOpen/2021%2003...eID=652190

---------

"Shareholders should also note that the Company had announced on 9 May 2019 that it had developed the Franchise Model with advice from its professional advisors, and had obtained an opinion from Beijing Dacheng Law Offices, LLP (part of the global law firm Dentons) following review of the information provided, that the Group’s business under the Franchise Model is in compliance with applicable laws and regulations."

https://bestworld.listedcompany.com/news...S4D7.1.pdf

I don't think it is an error. Anyone do business in China will know that the law is being refined as it goes. As the business evolve, good ethical business owners have to do the smart thing to capture the vast opportunity, while making sure that whatever we do don't harm others. So in this case there, it is likely that BW use a lot of Direct Selling incentive programs, but sell it under Franchise model. So if Regco wants everything to be black and white, any reputable lawyers are not going to put their name on it. 

The funny thing is that China government continue to let BW imports and sells, while an exchange regulator questions it legality 

[ghchua]

Hi dreamybear and DCF,

Its not for the exchange to determine whether Best World's business in China is legal or not. A independent legal opinion had been obtained and the independent auditor had also issued a disclaimer of opinion on their FY19 accounts. The regulatory concerns are not only its business model only, there are altogether 4 issues as flagged by the independent auditor:

1. Potential unrecorded transactions
2. Relationship with the Group's import agents and marketing agent
3. Goods sold but undelivered in the previous financial year
4. Legal review

https://links.sgx.com/FileOpen/BW%20Ann_...eID=648191

Unless Best World resolves all the above issues, the stock suspension could not be lifted. Otherwise, investors will be trading the stock using incomplete information as we don't know whether the audited accounts presented to the public could be relied upon since the independent auditor does not express an opinion on it.

[brattzz]

i wonder how long can a company be suspended from trading before being asked to exit the register? will sgx order BW to drop it's listing and offer an exit offer after X years of suspension?

[DCF]

i wonder how long can a company be suspended from trading before being asked to exit the register? will sgx order BW to drop it's listing and offer an exit offer after X years of suspension?

most likely they privatise and list it in HK, given that most businesses are in HK and Taiwan. The exchange and regulators there understand and can accept the gray reality of doing business in China