Friday, December 25, 2009

A Bitter After-Taste To DSC Solutions Listing (Holiday Reading For Bursa & Kenanga Investment Bank)


There have been discussions at Investalks.com on this topic. Someone commented that DSC may have been pushed up because its NTA was RM2.27. If you read the prospectus closely, you will get that figure but that was based on a pre-IPO pre- enlarged share issuance exercise. Read page 11 of the prospectus, you will find that the proforma consolidated NTA after the public issue and bonus issue will be just 13.16 sen.

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I think this is too important a posting to be relegated to the bottom of my posting listings. So, I have put it at the top again. I think Bursa and Kenanga Investment Bank must have been praying that nobody writes about this. Hey... none of the mainstream media picked this up at all???!!! WTF!!!


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Well spotted by Alex Lu on his popular nexttrade blog site was the quite clumsy listing of DSC Solutions. Let me say here first that the company should have been better advised by the lead manager Kenanga as well as by Bursa. But first, read up to see what the hoo-hah was about:

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http://nexttrade.blogspot.com/2009/12/dscsol-were-investors-not-aware-of.html

Tuesday, December 15, 2009

DSCSOL- Were investors not aware of the Bonus Issue?

DSC Solutions Berhad ('DSCSOL') is involved in the provision of AIDC solutions, software & engineering services. AIDC stands for Automatic Identification & Data Collection. AIDC allows companies to improve their business processes by changing from a manual to automatic data collection systems. This will enable the production of faster & more accurate reports- aiding management in its decision-making.

For its listing purposes on the ACE Market of our exchange, DSCSOL made a Public Issue of 12.578 million shares at an issue price of RM0.50. After the IPO (but before its listing), it carried out a Bonus Issue of 1-for-1. This effectively reduced its IPO price from RM0.50 to RM0.25. The stock was listed on Dec 9.

From the 15-minute chart below, we can see that the share price jumped on the first day of listing and thereafter it steadily sold down. I hope the reason for the bullish action on the first day of trading was not due to investors' misreading the Prospectus or that they were not aware of the Bonus Issue. If so, it could lead to a mispricing of the stock. The making of a Bonus Issue after the IPO closure & before the listing of the stock on the exchange is a practice that should be discouraged.


Chart: DSCSOL's 15-min chart as at Dec 15, 2009_9.24am (Source: Quickcharts)

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If you click on the chart, you will see that there were two groups of players at the very beginning of the trading day, one group thinking the IPO price was effectively 0.50 and the other knowing that it was 0.25. Naturally within the first couple of minutes, the share price had a trading range of between 40 odd sen and 60 sen, a highly unusual spread of activity given the actual IPO price was 0.25. From 40 sen to 60 sen itself meant a jump of 50% in valuation.

It opened at 47 sen went towards 40 sen, which to the promoters was already a highly spectacular IPO given that it was priced at 25 sen. But noooo, that's not enough, there were sufficient players in the market place who thought that the shares were "under water" (that its IPO was priced at 0.50) and should surely be shored up by promoters soon. Oh, yes, whoop-dee-dah .. it went on a merry way for the rest of morning session, trading as high as 91.5 sen - I would like the person who bought at 91.5 sen to try and seek compensation from Bursa and Kenanga. I doubt he/she will succeed, but I think the case needed to be heard by more people so that more investors do not get "conned" unintentionally.

The actual announcement from Bursa's website:

Initial Public Offering (IPO)
Reference No GR-091119-27659
Company Name
:
DSC SOLUTIONS BERHAD (ACE Market)
Stock Name
:
N/A
Date Announced
:
19/11/2009

Subject
:
PUBLIC ISSUE OF 12,578,000 NEW ORDINARY SHARES OF RM0.10 EACH IN DSC SOLUTIONS BERHAD (“DSC SHARES”) AT AN ISSUE PRICE OF RM0.50 PER DSC SHARE PAYABLE IN FULL ON APPLICATION COMPRISING:

• 500,000 NEW DSC SHARES AVAILABLE FOR APPLICATION BY ELIGIBLE DIRECTORS, EMPLOYEES AND BUSINESS ASSOCIATES OF DSC SOLUTIONS BERHAD AND ITS SUBSIDIARY COMPANIES;

• 11,078,000 NEW DSC SHARES FOR PLACEMENT TO SELECTED INVESTORS; AND

• 1,000,000 NEW DSC SHARES AVAILABLE FOR APPLICATION BY THE PUBLIC

AND BONUS ISSUE OF ONE (1) NEW DSC SHARE TO BE ISSUED AND CREDITED AS FULLY PAID-UP FOR EVERY ONE (1) DSC SHARE HELD AFTER THE PUBLIC ISSUE

IN CONJUNCTION WITH ITS LISTING ON THE ACE MARKET OF BURSA MALAYSIA SECURITIES BERHAD.

Notice how casual and matter of fact the phrase "AND BONUS ISSUE OF ONE (1) NEW DSC SHARE TO BE ISSUED AND CREDITED AS FULLY PAID-UP FOR EVERY ONE (1) DSC SHARE HELD AFTER THE PUBLIC ISSUE" was inserted as part of the announcement. OMG... that announcement IS NOT NORMALLY DONE, hence it must be highlighted properly, be reminded and alerted properly...

.

Look at the above chart, yes everybody wised up following the euphoria that the company's IPO price was really just 25 sen. Well, whoever got the shares or traded smartly, got the benefit of this near catastrophe. The shares has since slid from the 70 odd sen to the current low 30 sen... but to the owners, its a bloody fantastic price still given that its IPO price was just 25 sen. As nice as it was, the company owners did not get the benefit of the volatility because they were not allowed to sell any shares within the lock up period.

Who is going to stand up for all the investors who BOUGHT from 40 sen to 90 sen and still holding - we have to ask what kind of information were they relying on ... because we know that all investors genuinely thought that the price you paid for the IPO shares WILL BE the IPO share reference price - ask 100 people, see how many would disagree. Hence their confusion and/or reliance on available information is understandable. Don't do the "buyers beware" argument because that is dipshit-lawyer-ball-less-tactic ... that is seeking to be protected from claims, ... what we are here is to try to BE FAIR, BE REGULATORS THAT HAVE THE CONCERNS OF INVESTORS AT HEART, ... did we really do that here???

a) Nobody is saying that Kenanaga or Bursa or DSC "intentionally" conned the public. It is exactly that the same group of people who had no bad intentions, and that they also did not have market attuned instincts and market savvy knowledge - because if you have, you would HAVE KNOWN and PREDICTED that there will be substantial pockets of investors in the market place who DO NOT EVEN READ the prospectus closely. Please do not hide behind the guise of "its all there in the prospectus" to absolve your responsibility. Do not get lawyer-ing with me. We all know what "we should have done", please .... look at the evidence and tell me that nobody was mis-informed. It might have been mostly their own fault, but did the authorities and the promoters and lead manager did "enough" to alert investors, I would at least double-underline with red ink that there will be a one-for-one bonus issue AFTER the IPO but before the listing, and that the effective IPO price upon listing will be 0.25 and not 0.50 - what will it cost you all to do that in bold, in red, in the front page of the prospectus, and as well on the Bursa circulars and announcement page.

b) Accept that this bonus issue after the placement of shares but before listing WAS HIGHLY UNUSUAL and NOT THE NORM. Once you accept that, make steps TO ENSURE THAT ALL INVESTORS ARE SUFFICIENTLY INFORMED, ALERTED TO THAT FACT ... something which did not happen with DSC. You don't want this negativity with the newly launched ACE Market, do you??

c) Kenanga Investment Bank and mgmt of DSC, may I ask what was SO FUCKING DIFFICULT to sell 24m shares at 25 sen instead of 12m at 50 sen and then just list???? Why do the fucked up post IPO 1 for 1 bonus??? Why complicate matters? I know, the next time I get to list my company, I will sell 30m shares at 0.50, then prior to listing do a 5 for 1 bonus issue, and laugh all the way to the bank ... this makes the actual IPO at 0.10 but most will still think its at 0.50.

Am I the only one (with Alex) to see this big dis-service to investors? Imagine people buying Maxis new shares on trading day at RM16-17, thinking its good value, when actual IPO price was RM5 ... just because this was a smallish company does not alter the mechanics. If it happened to the Maxis IPO, all hell would have broken loose.

Well, at the end of it all, no one will apologise... Bursa will not, Kenanga Investment Bank will not ... because apologising is tantamount to acknowledging that they were "at some fault" - thus triggering lawsuits. Yusli, please don't say anything NOW, don't come out to say "Buyers Beware" shit now, it will piss everybody off. Do your internal investigation, and put in measures to prevent such occurrences again.

I have said it hundreds of times ... Bursa is stocked with TOO MANY LAWYERS, TOO MANY PEOPLE WITH INSUFFICIENT MARKET SAVVINESS, INSUFFICIENT MARKET SENSE .. if you did have that one fucker who is market savvy, that person would have alerted all to this... "hey, this could blow up, let's do a special reminder or special announcement, or send a special circular to all traders and remisiers to advise their clients before they buy or sell that the effective IPO price is 25 sen".

Nothing, nada, zilch ...

p/s photo: Some companies need to be "purged" of some employees like the photo would suggest

13 comments:

DanielXX said...

I can see your angst about this. I actually think there's some corruption in this, and I think Kenanga is in the middle of it. This is such an obvious misleading tactic.

I know now that Kenanga cannot be relied on, simply on the basis of this episode.

Kingsmen said...

hang those insider vultures to live no more...that all i have to say.

KP Gasket said...

Totally agreed with your comment, and for some reason, we may need to look at the share surely got some syndication playing on it.

For a company like DSC which the total issue share is about 104 million share, the first day volume is already over 70 million share which comprising about 70% of the total share issue.

If we where like to think that the owner cant sell their share due to some locked up regulation, it is really cant understand where this 70 million share come from.

If there are those same share is just trading buy and sell to make up the volume, for sure they are going for something.

If we see the trading volume from it first day of listing, the entire issue share of this company may already change had twice if all the trading share is not the same.

Au Yong Soon Kok said...

I'm not supporting DSCSol nor Kenanga nor Bursa but don't you think this is the trend now in advertising. (I equate the IPO prospectus as an advertisement)Just look at AirAsia advertisement...Rm99 then small print one way. Then very,very small print in an inconspicuous corner..taxes not included. We can easily argue that anyone travelling by air would want a return ll in fare. Afterall, the airport taxes are unavoidable. At one time I thought I could buy one way from KL and then after buy one way from my destination. Ended up more costly than normal flight. What I am trying to say..if you want to make an offer..make it with sincerity be it IPO, Airfare, Houses(always be careful of ..start from...') etc.

My point?.....the powers-that-be should start looking at the ethics of 'advertisements..

Ken Yong said...

Earnings Per Share accounting guidance clearly requires retrospecte ive restatements.... i.e. historical EPS should have been adjusted through out the prospectus. The reason why this requirement is there is strictly to prevent cases like this. If this was not done, then investors should be asking the underwriters and reporting accountants why.

Kunta said...

Bro,
Now with everything left with Bursa, the Security Commissionanos can conveniently blame the Bursa'rians for the cock-ups!
The trouble is both jokers (full of lawyers) think that disclosure is sufficient.
When are their contracts due for renewal? Najib & Co.. take note ... or your mandate in due course will also be due for review!!

TK said...

Bonus issue after the IPO closure & before listing.... how can Bursa approve such thing!!!!

Glypro said...

That which is unspoken speaks much for the advising IB team and the regulator.

It is during difficult situations when those in command are able to rise to the challenge of dealing with the matter.

But these often think more of the trappings of the industry than of the responsibilities that come with the perks.

c said...

pre-opening price ref 0.25 all market player expected to know from BFE but big block for private placement(11mx2=22m) n small public portion (1Mx2=2m)= player or placement block try to clear on opening day n b4 t4 , your concern should highlight that investment bank n (player) r trying not to tell u relevent info as law r allow.sc n bursa ..leave it to investor..? think about it who will benefit from this activities , ? when u r able to distribute so much share as high as possible on listing day (look at the turnover) n normally bursa no action on first day listing then u know.... they will be able to ....DIStribute!!!!
hope we all learn n not to fall into this type of trap again. let them play with no follower? may be ....

Remus said...

Thanks highlighting. Appreciated.
I do value your blog more than the 'main stream" or official source.

Remus said...

Thanks highlighting. I can appreciate/value your blog much more than the 'main stream' or official source.

Trashed said...

Negligence by Bursa or Fraud by Kenanga IB ?

Salvatore_Dali said...

i dont think there was fraud or collusion or intentional deception ... i think there were just very inept and un-market savvy ppl at these places...