COMMENT: Where is the sunset for cowboy companies?
A S$16 million loan disappears into thin air, the company that got the money is declared insolvent, then news emerges that there is no truth to the claim of insolvency and the person in charge is nowhere to be found.
Welcome to the cowboy country called China, the gravy train that many money-hungry Singapore-listed firms hopped on to in the hope of making a quick buck but are now the target of a public lashing by the SGX.
In a damning column posted online last week, SGX’s new chief regulatory officer, Tan Boon Gin, pointed to the “dubious practices” of some of these companies.
He wrote: “In some instances, the companies reported customer complaints for compensation more than 10 times the value of the original sales which is the subject to the claim.
“In others, trade receivables written off ballooned and explanations offered did not provide clarity or comfort.”
In layman’s language, this is a corporate scam with many China companies rushing to list in the SGX at a high price, then placing out shares at even higher prices during the stock market boom of 2005-2007 and finally announcing large write-offs and write-downs to balance the books.
All this was to cover up the truth that millions of dollars of investors’ hard-earned money had already been drained away.
Why make this announcement after the victims of the bloody mess created by the collapse of the SGX-listed China companies have been licking their wounds for some time now?
The flag bearer of the small investor, David Gerald, said: “It is worrying for investors to know that governance is still miles away in some China-listed companies.”
Worrying is one thing, but what can investors do in situations like this?
The CEO of Securities Investors Association (Singapore) said: “Investors have to exercise caution before picking any of these companies. I would rather give them a miss. There are plenty of good opportunities here. Why take the risk?”
But you can’t just blame the investors for this kind of scam. The SGX tried to cash in on the China boom story, allowed many companies to rush in to list, made money in listing and clearing fees but was not robust enough in its quality control and monitoring systems.
It is finally waking up to a China story gone sour and warning investors to be careful. That is like trying to shut the door after the horses have bolted.
In Tan Boon Gin, they have a man who means business. He was with the commercial affairs department before joining the SGX in June. And he has already started flexing his muscles by rapping the knuckles of one company for breaching several listing rules. The CEO and a non-executive director were not spared the lashing.
The SGX has also raised the red flag on two other companies for possible breach of rules.
SGX’s problem is that it is both a regulator and a business concern. It is like the SMRT which has to serve both the shareholder and commuter.
Walking that thin line between two competing interests is tricky and both have not had a good record in perfecting the balance.
Hopefully, regulator Tan will help correct the imbalance for SGX.
