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Insider Selling 101???

The SC and Bursa must look into these developments of possible insider selling. Moola has thrashed this Megan issue to death (and very well deserved too). The question is when did the directors and management came to be aware of the likelihood of default. Surely things like this cannot happen overnight. Significant events and reasonable time till event are issues which must be weighed and to ascertain the "motives, knowledge possession" and the planning to act on "inside information". More stringent guidelines must be in place on lock up periods for selling/buying by "insiders". Is selling a month or two or even three month before a very significant event considered "legal" and above board?

We can all debate on this but we must continually improve the integrity and regulatory side of the markets to rise to global best practices. This is small when you talk of Megan, I hope not to discover similar questionable selling in Transmile ... anyway too tedious to do witch hunt, Moola can do it much better than me.

Yes or no, I hope the Bursa and SC will make a statement as to whether the selling below is considered OK by present standards.

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TheEdgeDaily 07-05-2007: Megan Media down on RM49m trade loan default

Megan Media Holdings Bhd's shares fell as much as 17.5 sen or 27.13% in early trade on May 7 after its subsidiaries defaulted on RM47.36 million maturing trade facilities. At 10.40am, it was trading at 51.5 sen, down 13 sen or 20.16%. There were 18.98 million shares done at prices ranging from 47 sen to 60 sen.

The company announced on May 4 that its subsidiaries Memory Tech Sdn Bhd (MTSB) and MJC (Singapore) Pte Ltd were unable to meet these debt obligations by April 30, 2007. The company added “it was established that further impending maturities are also unlikely to be paid”.

“MTSB and MJC are experiencing financial difficulties as a result of constraints on its current cash flow from its operations which are insufficient to service and repay amounts due to lenders. Principally, this has been due to an exceptional build-up of its trade debtors,” it said.

Megan said the company had appointed a deputy chief executive officer and specialist advisory team to support an investigation into the underlying causes of the default and, if necessary, to formulate and initiate a comprehensive debt restructuring process.

“This will likely entail meetings with regulatory authorities, lending institutions, rating agencies, trustees and other relevant parties as well as appointment of an appropriate investment bank, accounting and legal firms to facilitate the due process,” it said.

Based on the available information, the group’s total exposure to its subsidiaries amounts to MYR465 mln, comprising a US$40 mln loan that was extended by the parent company to a subsidiary, and an issue of Bai’ Bithaman Ajil Islamic Debt Securities (BaIDS) with guarantee from the parent company.

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technically insolvent - total borrowings of MYR888 mln vs. total shareholders’ funds of MYR507 mln by end 3QFY07. High potential for bankruptcy.

YEO WEE SIONG (Director)

Disposed23/02/2007
5,573,249

Disposed26/02/2007
2,000,000

Disposed28/02/2007
1,940,997
Disposed06/02/2007
795,000

Disposed07/02/2007
500,100

Disposed08/02/2007
712,400

Disposed09/02/2007
292,500

DATO' DR MOHD ADAM BIN CHE HARUN (Director)




Disposed11/04/2007
400,500

Disposed12/04/2007
120,000

Disposed17/04/2007
148,000
Disposed29/01/2007
100,000

Disposed30/01/2007
570,000

Disposed31/01/2007
100,000

Comments

rask3 said…
Hi,

With or without inside dealings, Megan was and is toxic material from a FA perspective. Anyone who did a little digging in the ins and outs of the company, from publicly available info wouldn't have touched it. Or he would have sold it at the earliest oppurtunity, if he already had the stock.


Anyway, I feel the insiders in this case may not be held culpable. They have been selling from January, and not just before the release of the latest results. I could be wrong though. Still, as they would have filed their dealings within the stipulated time, that would or should have, served as pointer or warning to stubborn or overly hopeful shareholders.


One thing to remember is: The stock market is not a level playing field. Never has been, in spite of all the rules and regulations. It is always better to err on the side of caution


Just my two cents.


Rask
Salvatore_Dali said…
rask3,

fair comment, but we seem to accept insiders selling ahead of the rest more readily than in more developed countries, why?? somehow i don't think these would be allowed in USA, because they are selling with vital inside information and acting on inside information ... that's why most directors/owners in US listed firms would have an approved scheduled selling or buying plan (e.g. I plan to sell 10,000 each month for the next 12 months auto triggered, etc...)

Accepting a bad situation is not improving matters. I think we don't just accept but criticise and stretch for better.
rask3 said…
Hi Dali,

Of course insiders should be punished for infringement of laws.
There are no two ways about it.


But there are bound to borderline cases where it would be difficult to pin them down with laws.


Of course, the system and conditions in US gives better protection to minority shareholders. Remember Martha Stewart's stint behind bars? I would like to see that kind of thing happen in Malaysia. In my lifetime, if possible.


High hopes?


Rask
boy said…
The criteria to go public is less stringent over the years.Those who subscribes IPO are like committing suicides.Investors should be more knowledgable before anything can improve.Be conservative in your analysis.Come and join me in my discussion Value Investing In KLSE at http://boyboycute.wordpress.com
Moola said…
Sal,

I actually have a sort of trading blog.

mootaktrade.blogspot.com

Care to have a visit and also add this link?

please?

:)