Best World

[ghchua]

Actually, why not declare a $0.136 per share dividend instead of buying back 10% at $1.36 ?

By buying back 10% at $1.36, they are effectively increasing their stake indirectly as they have indicated that they will not participating in this equal access scheme.

Declaring $0.136 per share dividend will not increase their stake in the company.

[dreamybear]

Actually, why not declare a $0.136 per share dividend instead of buying back 10% at $1.36 ?

By buying back 10% at $1.36, they are effectively increasing their stake indirectly as they have indicated that they will not participating in this equal access scheme.

Declaring $0.136 per share dividend will not increase their stake in the company.

I understand but the context of my message is on shareholders' interest and returning capital to the shareholders. The mgmt could have undertaken other options, i.e. declare dividends or capital reduction.

[header]

So Dreamybear, as what Ghchua has stated, it is clear that the management has other objective in mind. If I am the founders, I would also like to see how to privatise the company at the lowest possible cost while maintaining my good reputation. This would be better than letting SGX continue to suspend the trading of my company shares and cast doubts on my integrity.

I have mentally write-off my shares in BWL. So I likely to hold it. Anyway, even if I accept the offer, I can only sell back to BWL max 10% of my shares.

[dreamybear]

So Dreamybear, as what Ghchua has stated, it is clear that the management has other objective in mind.  If I am the founders, I would also like to see how to privatise the company at the lowest possible cost while maintaining my good reputation.  This would be better than letting SGX continue to suspend the trading of my company shares and cast doubts on my integrity. 

I have mentally write-off my shares in BWL.  So I likely to hold it.  Anyway, even if I accept the offer, I can only sell back to BWL max 10% of my shares.

Actually, from my perspective as a shareholder, I also hope the privatization come soon, even if it's going to be some S$1.36 kind of price(although hopefully not so low). This is better than indefinite suspension - I feel there is no point spending so much time & effort in a stock where the "value" is subjected to an offer price.   

The fact is we have been waiting the past 2+ years to get $1.36, maybe if we wait another 2 or more years, we still get $1.36(+-) in the end or maybe stay as a private(delisted) shareholder - story for another day. We also need to consider the opportunity cost - in the process, we may have missed out($) or missed out spotting(time/effort) better opportunities.

BTW, I think the max we can tender is closer to 20%(Para 2.3.5 towards the end), because of the non-participating shareholders.

[ghchua]

BTW, I think the max we can tender is closer to 20%(Para 2.3.5 towards the end), because of the non-participating shareholders.

No. The maximum you can tender is all your stake in Best World. 20.64% of it will sure be hit, since the controlling and substantial shareholders plus associates had chosen not to participate in the scheme.

The rest you can tender as excess shares. If some or all minorities had chosen not to participate too, then some or all of your excess shares might be filled and bought out as well at 1.36 per share.

[dreamybear]

Just wanted to seek views from buddies here. As a shareholder lender, I may have a biased view. But I do feel aggrieved that I am not given an option to agree to the $1.36 cash settlement, especially when this is not a delisting offer.

I think it is only fair and common sense for any human to expect the exact thing that he/she lends out to be returned and not to be returned with something else especially when there wasn't any prior discussion.

The cash settlement(if activated) is akin to making it mandatory for me to accept the equal access offer(EAO) for my loaned securities when the EAO is supposed to be optional. While I know there are processes, I fail to understand the logic of this one.

Issues / Questions 
1. There is a lack of transparency - which shareholders will be affected and how many shares will be affected ?
2. Why / under what circumstances would the borrowers be unable to return the loaned securities ? There should be computer records of where the loaned shares are.
3. The computation for the number of shares eligible for the EAO can be done based on computer records, i.e. how many current shares in CDP + how many are loaned out. In the event that a person's loaned shares > 20% max of eligible shares, then we can perhaps understand the rationale of such an exercise for affected shareholders. Is there a need for such a blanket exercise ?
4. Is there no other or a better way to implement this whole exercise ?

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BEST WORLD: Loaned shares to be recalled by CDP from borrowers
https://nextinsight.net/story-archive-ma...-borrowers

[ghchua]

Hi dreamybear,

By right, if a share had been suspended, CDP should have initiated a loan request recall to the borrower. If the borrower is unable to return those shares, it will be cash settled at the latest closing price. Also, do take note that from the terms and conditions of the Share Lending Programme, with the exception of dividend payout, for any other corporate actions, CDP will recall those loaned shares back to the lender. This applies to stocks that are not suspended as well.

This EAO is a corporate action, and therefore CDP will initiate a loan request recall as stated in the terms and conditions.

As to why $1.36 is the cash settlement price, it is the last trading price of Best World before suspension. Therefore, it is used as the settlement price as per terms and conditions of the SGX Share Lending Programme. It had nothing to do with the EAO offer price. These are two different matters altogether.

Computer records of loaned shares? I think you have mistaken. Borrowers lend shares because they wanted to short sell. They would have already sold those shares that they have borrowed. So, they are not holding any shares in their hands. They could have sold their borrowed shares at various prices to various parties. And those parties might have also sold those shares again. How could CDP track back? Even if CDP could track back., how are they going to settle with those buyers of those borrowed shares at various prices?

If Best World shares are still listed, things would be much simpler. If the borrower could not return, CDP can attempt to buyback from the market and return those shares to the lenders. But now that Best World had been suspended, those borrowers and CDP will have a harder time to find shares to return to the lenders. It is really the function of the market and in this case, it is not working well because the shares had been suspended.

[Coco]

Hi dreamybear,

By right, if a share had been suspended, CDP should have initiated a loan request recall to the borrower. If the borrower is unable to return those shares, it will be cash settled at the latest closing price. Also, do take note that from the terms and conditions of the Share Lending Programme, with the exception of dividend payout, for any other corporate actions, CDP will recall those loaned shares back to the lender. This applies to stocks that are not suspended as well.

This EAO is a corporate action, and therefore CDP will initiate a loan request recall as stated in the terms and conditions.

As to why $1.36 is the cash settlement price, it is the last trading price of Best World before suspension. Therefore, it is used as the settlement price as per terms and conditions of the SGX Share Lending Programme. It had nothing to do with the EAO offer price. These are two different matters altogether.

Computer records of loaned shares? I think you have mistaken. Borrowers lend shares because they wanted to short sell. They would have already sold those shares that they have borrowed. So, they are not holding any shares in their hands. They could have sold their borrowed shares at various prices to various parties. And those parties might have also sold those shares again. How could CDP track back? Even if CDP could track back., how are they going to settle with those buyers of those borrowed shares at various prices?

If Best World shares are still listed, things would be much simpler. If the borrower could not return, CDP can attempt to buyback from the market and return those shares to the lenders. But now that Best World had been suspended, those borrowers and CDP will have a harder time to find shares to return to the lenders. It is really the function of the market and in this case, it is not working well because the shares had been suspended.

Ghchua,is it possible that borrowers may not have the financial means to settle in cash? Or was there adequate collateral supplied by borrowers  upfront at the point of borrowing?

[ghchua]

Ghchua,is it possible that borrowers may not have the financial means to settle in cash? Or was there adequate collateral supplied by borrowers  upfront at the point of borrowing?

Possible. But CDP will go after the broker and the broker will go after the borrower. Ultimately, the broker will still have to pay up.

[dreamybear]

Hi ghchua,

Thanks - Yes, we can tender excess shares, not only the 20%+ entitled.

Thanks for your reply and help - I went back to dig up the SBL. Strangely, why weren't the loaned shares recalled straight upon suspension 2+ years back then ?

Actually, the $1.36 is the EAO price according to the SGX letter*.

Price issue aside**, I am more upset on the process of "forced" settlement - literally, it means I am forced to accept cash instead of getting my loaned shares back. This defeats the spirit of "providing the option" to participate in the EAO, it's akin to CDP taking the decision to accept on our behalf with no consultation whatsoever.

Just to clarify, I mean in this technological age, which party the borrowers sell to, and the "route" of loaned shares should be traceable. The shares couldn't just disappear into thin air. Ultimately, wherever the loaned shares go, I believe CDP is still in control of the share register? I believe enforcement is possible but perhaps difficult ?

So it bags the question - is it a matter of administrative convenience ? We have to weigh this against basic principles as humans : ok may not be the best example but I don't borrow a spoon from a person and happily return a fork and assume everything is fine.

If it is really technically impossible to trace with current IT systems, or somehow really just impossible, then perhaps SGX shouldn't allow this exercise or at least be forthcoming with explanations to the helpless. Have the implications to all stakeholders been thought through or consulted ? Actually, a simpler way I could think of is perhaps for the shareholder to indicate whether he/she intends to participate in the EAO. If not, then there is no need to recall the loaned securities.

Just curious whether anyone knows is this the first time for such a scenario in SGX listed stocks ?
 
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*https://www.investingnote.com/posts/2391894  (2nd pic)

**"....The Offer Price is the last traded price immediately preceding the trading suspension of the Shares, and it represents a discount to the average of the closing market prices of the Shares over the five (5) Market Days on which transactions in the Shares were recorded immediately preceding the trading suspension of the Shares...." (emphasis added)
https://links.sgx.com/FileOpen/2022%2001...eID=697843

And we also have to consider the context of what happened near the start of the suspension period, it can be argued that simply basing on trading price near such incidents may not be fair.

"....BEST World International shares fell as much as 11 per cent on Wednesday after short-seller Bonitas Research published a 28-page report that questioned the authenticity and legality of the premium skincare firm's profits.

When the company halted trading of its shares at 11.25am, the stock was down 8.99 per cent at S$1.62 on volume of 8.7 million shares...."

https://www.businesstimes.com.sg/compani...tas-report