Ban Joo - Placement of shares at a discount

my gifts

On June 21, 2007, R. Sivanithy of BT wrote this article entitled "Ban Joo placement: why the SGX delay?".

This is how the story started.

Nov 5, 2006 - Ban Joo & Co proposed the placement of 145 million new shares @2.5 cents to two private investors. The net amount to be raised is $3.57 million, which the firm will use for acquisitions and investment in new businesses.

Two regulatory procedures to clear for the fund raising exercise to go through.

1. As the placement price is more than 10% discount to the prevailing market price of 4 cents at that time, SGX's approval is thus needed.


2. A special meeting for shareholders to give approval to it.

So what went wrong?

1. In his article, Sivanithy wished to know the reason for the delay between application date of Nov 5, 2006 and approval date of May 18, 2007.


2. The share price has risen to 24cts as of Jun 22, 2007. The intended buyers at the proposed price of 2.5 cts, would stand to make 21.5cts per share. A whalloping $30mio profit!!!! So existing shareholders are obviously not happy with the deal.


3. There is no "lock-up" clause in the proposal ie. the new shareholders would be free to sell the whole 145mio shares if they so wish.

FYI - The Extra General Meeting (EGM) will convene on Monday Jun 25, 2007, for the shareholders to decide on the proposal.

SGX responded promptly on Jun 22, 2007 as follows:-

• SGX received the application for listing and quotation of the placement shares on Mar 19, 2007 and NOT Nov 5, 2007 as alleged by Sivanithy.


• The proposal could not be accepted earlier as the company did not have any independent directors on its board. SGX had to remind the company of its continuing listing obligations. After which, the company appointed two new independent directors. [What type of company is this when it can't handle listing requirements?]


• The company confirmed that the issue price remained at $0.025 for each new share despite being reminded by SGX of the BIG discount.


• The proposal was approved on May 18, 2007.

SGX is thus in the clear on this.

What is "placement of shares"? The company is selling new shares at a price agreed to some buyers payable in cash or with assets. It is different from a rights issue where the new shares are issued to ALL shareholders at a certain ratio eg. 1:5 ie. 1 new share for every 5 shares you are holding.