Implication of being on the SGX watch-list

[sgmystique]

Hi Buddies,

It would be a big help if someone could let me know the implications of a company being on the SGX watch-list. Am listing below the circumstances leading to the firm being on the watch-list:

"The Board of Directors (the “Board”) of Compact Metal Industries Ltd (the “Company”) wishes to announce that following the Notice of 3 Consecutive Years’ Losses released by the Company on 03 March 2015, the Singapore Exchange Securities Trading Limited (the “SGX-ST”) has notified the Company that it will be placed on the watch-list with effect from 04 March 2015. The Company will have to fulfill the requirements under Rule 1314 of the SGX-ST Listing Manual for its removal from the watch-list within 24 months from 04 March 2015, failing which the SGX-ST would delist the Company or suspend trading of the Company’s shares with a view to delisting the Company."

Since the company has been unable to fulfill the requirements of the SGX-ST Listing Manual (please refer links given below) does it mean that trading in Compact Metal will be suspended from Monday (6th March 2017).

http://infopub.sgx.com/FileOpen/CMIL%20U...eID=441946

http://infopub.sgx.com/FileOpen/Ann%20Up...eID=442013

Look forward to your inputs.

[Jacmar]

When in doubt just google and you will know. Anyway this blog explains it all. basically given 2 yrs then the axe fall on it.

http://www.valueinvestasia.com/2014/08/2...watchlist/

[soros]

Why is it the public shareholders cannot propose putting the company into liquidation ?

[chew]

No expert but from googling seems if they are unable to cure itself they will be suspended from trading and asked to make an exit cash offer whichmay include a liquidation of assets.

http://rulebook.sgx.com/en/display/displ...48&print=1

http://rulebook.sgx.com/en/display/displ...34&print=1

[sgmystique]

Compact Metal has been served with the Notification of delisting yesterday. 

http://infopub.sgx.com/FileOpen/Notifica...eID=442186

Salient points:

1) The board of directors (the “Board”) of the Company would like to inform the shareholders that the Company has received a notification from SGX-ST on 3 March 2017. In this notification, the SGX-ST has informed the Company that its shares would be delisted from SGX-ST on 3 April 2017 and the Company has to make arrangements for the return of share certificates to shareholders. 

* The company and its shareholders get a one month advance notice before delisting so that they can take the necessary measures with regards to their shareholdings.

2) Pursuant to Listing Rule 1306, the issuer or its controlling shareholder(s) must comply with Listing Rule 1309 which provide inter-alia an exit offer to will be made available to the shareholders. The Company will continue to update shareholders on the exit offer.

* Now this is where it gets interesting. Compact Metal has a Net Cash balance of $28.9 million (Cash - ST debt - LT debt) and a market cap of $24.4 million as on the 3rd March. The NAV is $0.0539 per share vis-a-vis a share price of $0.021. I think I would hold and wait for the exit offer.

3) Trading of the Company’s securities will continue until 5.05 pm on 31 March 2017 and remains suspended from 9 am on 3 April 2017 until completion of exit offer.

* I guess people who rushed to sell yesterday at prices as low as $0.018 per share would have assumed that trading would be suspended with immediate effect. The fact that there were buyers ready to pick up the almost 5,500 lots offered at prices ranging from $0.018 to $0.022 indicates that they know the delisting process better!

The queries I still have:

1) What happens to the shares you hold (if any) once the company is delisted on the 3rd April 2017.
2) Does the company have to go through an IPO to get relisted once again on the SGX or is there some other process of relisting.

[brattzz]

I recalled this answer for 1),

1) u become a pte investor in this co. and your rights are not regulated by MAS listings rules anymore.
it's up to the pte co. to deal with u, vice versa...

Best not to fall into this outcome....

[chew]

What stops the company from making a low ball offer? Are there any regulatory safeguards?

[lanoitar]

The fact that there were buyers ready to pick up the almost 5,500 lots offered at prices ranging from $0.018 to $0.022 indicates that they know the delisting process better!

You might want to be careful with this assumption. History is the best teacher, and I would recommend that you study past cases to form a better judgment. If memory serves me right, only 1 out of the 5 first batch of forced delisting received a reasonable exit offer.

In particular, pay attention to the shareholding structure. What would motivate one of the major sharesholders to buy over? And in the absence of other buyers (& many desperate sellers), why would he pay you a fair price? These are important questions for anyone looking make a wise trade. Depending on just a strong B/S isn't sufficient.

1) What happens to the shares you hold (if any) once the company is delisted on the 3rd April 2017.
2) Does the company have to go through an IPO to get relisted once again on the SGX or is there some other process of relisting.

1) The company will issue you a certificate for your shares. It's still a public company (since > 50 shareholders), but an unlisted one.

2) This will be the same as any other unlisted company. No shortcuts.

[ghchua]

Liquidation is an option to get hold of the cash in the company but if the majority shareholder voted against it, there is no way that minorities can win since it is a special resolution and needs 75% of the votes to go through. I have encountered companies when the majority shareholder refused to make an exit offer to minorities when SGX informed them to delist, but they decide to follow rule and offer a liquidation resolution. But as I've said, there is no way minorities can force a liquidation if the majority shareholder voted against it and therefore you might end up as a shareholder of a cash rich but unlisted company.

[chew]

Considering this case is a company with good asset backing, yes agree with gchua that the risk appears to me if there is shareholding acting in concert with motivation to block a 75 % special resolution to liquidate the company. Such a group able to thwart a liquidation can also eventually foist  a low ball offer that minorities feel compelled to accept.