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Sakmongkol ak 47

Wednesday 21 November 2012

Breakdancing in The Stock Market: Taking Companies public, private and then public again!

Now , besides Walla, Bruno, One Malaysian, Donplaypuks who as we all know offer us penetrating and rapier sharp glosses over many of my articles, I have a recent equally formidable participant who provides us with many illuminating opinions. His/her name is Sumpitan emas.  I welcome this person to offer opinions, debates and criticisms on the many topics that I have raised. I am keenly aware that the opinions I offer in those articles are deficient in many aspects but nevertheless put out in the open, expressing my willingness to reason and debate and inviting much persuasive thinking not necessarily in agreement to my own on many of the issues.
In my most recent article, I raised a disturbing point on the passivity and inertia of the government through KLSE and other regulatory bodies in dealing with the unfettered movements in and out of the stock market of players such as Ananda Krishnan. Coincidently I must give credit to my friend The Oracle of Syed Putera for alerting me on this issue. The matter was picked up by Sumpitan Emas and he has commented on the said issue. I have the pleasure and privilege to reproduce his thoughts here, verbatim.
I wish I could respond to every topic you have covered here, but suffice for now; I will deal with the part about Ananda having three bites after three dippings. Brilliant capitalist entrepreneur or plain investment opportunist, or, both, operating within an investment regime with poor oversight by the very institutions specially formed for such functions. Or is the supervisory function lacking because the grey areas on investment rules and regulations have never been adequately addressed? Where is the KLSE? Where is the Securities Commission Malaysia?
 Though dated, this article from Fortune, 11 Nov 1985 edition, written by Benjamin J. Stein puts in focus who exactly benefits when a listed company is taken private and who loses. Though written for the U.S. the legal points raised are, in my opinion, relevant and worthy of discussion, and perhaps action to prevent further unfettered ‘freedom of movement’ — MIMOMIMO – MovingInMovingOutMovingInMovingOut. What I feel are the key points raised by Attorney Benjamin J. Stein are given below:
The great genius of the system of public corporations is the ability to raise vast sums for economic development. Its great curse from bubbles to watered stock to Ponzi schemes has been the temptation it offers managers and other insiders to abuse the trust of stockholders and steal from them in a seemingly endless variety of ways.
 A particular troublesome form of insider abuse has developed in the past decade without anything approaching full public discussion of its ethics or legality. Known as insider leveraged buyouts, management buyouts, and going private, deals of this type totaled billions of dollars and involved major investment banks and law firms. On their face, independent of the specifics of each deal they seem to me to raise the most basic questions of whether stockholders are getting the legal and ethical protection they need and by law should have.
 Seen up close.., they work like this: a group of insiders — officers and directors — works with an investment banker and a law firm to carefully analyse the assets of the company. If the insiders perceive a large difference between the going stock price and what they can get by breaking up the company, liquidating it, or redeploying the assets, they cook up an offer to buy back the company from the stockholders and “take it private.” Their offer is more than the stock market price. But it is — by definition — substantially below what the insiders believe the value of the company will be once they have it as a private fief.
 The insiders send a prospectus offering cash or a combination of cash and notes for the outstanding shares. The prospectus usually cites the burden of regulation on a public company and the market’s lack of appreciation for the company and includes a pious assertion by an investment bank (hired by the insiders) to the effect that the price offered the shareholders is fair and adequate.
As far as I have been able to tell, no insiders have ever put these words, or words to this effect, in a prospectus: “Notice — we the management and our pals in the investment community believe we can put up a small amount of our own money, take all the cash out of your company, borrow the rest, and rapidly make many times the amount we put in. It is altogether likely our return on investment will be exponentially greater than yours. That, dear stockholders, is the only reason we would do such a deal.”
Managers and directors are, by law and custom, fiduciaries for the stockholders. Fiduciary care, as a matter of unvarying law from the Middle Ages to the present, requires that the fiduciary place the interests of the stockholders ahead of, prior to, and superior to his own interests at all times and in all cases………
Query (as we used to say in law school): How can an insider conceivably be exercising his fiduciary care to a stockholder if he plans buy that stockholder out at a low price and then resell or hold the stockholder’s former assets at a higher price? If the insider knows a way to realign corporate assets to realise more value, is he not legally and ethically bound to do that for the benefit of his cestuis, his wards, the stockholders? How can he justify buying from the stockholders something cheap he knows is worth more, often far more, than he paid for it? Returns to insiders in some leveraged buyouts have been 40 to 1 and better, while stockholders got a few percent on their money. How can fiduciaries do that? ………
Query: When insiders do a leveraged buyout, are they not inevitably acting on insider information? Won’t they always, in every case, know the true value of this real estate or that invention or this pending contract or that competitor’s problems far better than the stockholders to whom they make their leveraged-buyout offer? If that is so, as it inevitably is, are not the insiders just as inevitably acting for profit on insider information? Why is this allowed?........
Query: Why are insiders not required to disclose — under Rule ….or under Rule…. —, the going-private rule, which also requires full disclosure — the very basic fact that they plan to make far more out of the corporation’s assets than they are paying stockholders for them?.........
 To lump all of this into one mound of legal and ethical sorrow: How, under fiduciary standards, insider trading restrictions, and full-disclosure requirements, can insiders get away with transactions that unavoidably call for the insiders to treat themselves vastly better than their ward-stockholders, on inside information, without full disclosure?........
 Investment bankers are required to certify in all going-private deals that the purchase price is fair. But the same investment banker or a closely connected firm may already be at work reselling the corporate assets and may know that the stockholder is receiving far less than the insider will get. How then can the “outsiders’ price” possibly be fair? How for that matter, can the investment bankers possibly represent the stockholders as a large, anonymous mob while their very large fees are paid by the insiders, whose interests by definition are substantially divergent from the stockholders? Aren’t they also fiduciaries?........
Something is wrong on Wall Street. ]]
 Something was wrong in Wall Street in 1985, but nothing was done to fix it. By October 2008, many things really went wrong in Wall Street. Should we fix KLSE now to stop Mr Ananda and many like him from doing the jig? He was widely reported to have presented a top-of-the-line jet-ski to the Sultan of Brunei Darussalam many years ago. Whatever for? But further access to the palace was effectively neutralised by vested and intimate interests from within Shell International. The moral is – ambition propelled by huge amounts of money cannot replace long-term relationship established through years of abiding friendship.
 Some money, some ambition, some guts, some cheeks. We have them all in Malaysia.
Where is the yacht built in Turkey moored now, anyone?


bumi-non-malay 21 November 2012 at 04:49  

Pointless to discuss insider buyout to Malaysian when Blatant corruption and regulation abuses cannot even make Malaysian angry.

Point in case is the Tun Dr.M and Daim(so called corrupted Oracle of Syed Putra) MAS Fiasco in 1992/93....

How on earth when MAS was trading $3.50 can be bought for $8.00.... the worst is that if you were a holder at $ could not sell for $ lest insider buyout you are paid the premium like in Maxis, Astro to shut you up...etc...

If you think Felda issues is BAD then MAS was EVIL to the N th extreme!!

The list goes on with blatant things of corruption but because UMNO in power its always further action....point in case NFC, $40 million Sabah UMNO fund least the internet is exposing UMNO as malay muslim Liars and the choice is clearer each day for Malaysian and especially malays to end the SHAM of UMNO.....don't wait....the world waits for no humans to progress! Stop living a lie and covering up lies. If you did, you just enhanced your poverty level and increase your years as slaves to UMNO ...Itu pun satu DOSA!!

monsterball 21 November 2012 at 05:21  

Anything concerning have Umno b rouges and thieves greedy eyes to think of schemes how to make and find Malaysian suckers.
They are in politics to have money power...not earned..but keep stealing...a short cut to buy up the whole country and govern forever.
Suddenly...Malays are not that poor now...and who does Umno b is stealing from?...his own race.

bruno,  21 November 2012 at 05:38  

Dato,the difference between Wall St and KLSE are if a trader break the securities law the trader will have to pay.If insiders trade on inside information they will have to pay dearly too.

Just recently hedge fund manager,billionaire Jayaratnan was fined tens of millions and sentenced to almost ten years in prison for trading on inside information.His informers,all company directors and traders were also sent to prison.

Many years ago,a Wall St white shoe trading firm's MD was pillow talking with his mistress,a porn actress.The mistress gave the tip to another lover and the guy bought shares and was caught.The MD's wife divorced him,and he was found guilty of pillow talking,although no money changed hands.He spend two years in prison,his career and family life wrecked.And his mistress never bought a single share or made a single cent,but was put on five years probation for passing on pillowtalk information.

In the KLSE small fries will get caught and made an example off.And the big fishes and political cronies will swim off scott free.That is called Bolehland.

bruno,  21 November 2012 at 06:54  

And this morning the FBI picked up an ex SAC manager Mattew Martoma,ex employee of hedge fund boss Steven Cohen in Florida for insider trading.His winnings for the boss,276 million dollars.They are investigating the hedge fund boss and five others.

To date the on going investigations have cooked fifty well known traders and directors,the most well known being Galleon fund boss Raj Rajaratnam and former Goldman Sach's director Raj Gupta.The net is getting wider and wider and spare no one,powerful,rich or poor.

Sumpitan emas,  21 November 2012 at 08:35  

"But further access to the palace was effectively neutralised by vested and intimate interests from within Shell International." should read as "But further access to the palace was rumoured to have been effectively neutralised by vested and intimate interests from within Shell International.

Anonymous,  21 November 2012 at 09:28  

A great eye-opener to many. Besides Anandas, how many more of such rip-offs have escaped the shareholders notice?

Anonymous,  21 November 2012 at 09:39  

Yes, many a M'sian has long memory. It just that they r feeling powerless to do/say much under the old regime.

Internet changes that, no thanks to the water-walking mamak's insistence of non-censorship! That's should be a brownie point when he faces The One.

Then GE12 changed everything! Proving Joe M'sians r not lemmings. All it takes is JUST the right call & timing.

Ananda's has his pre-karmaic predestine in the form of his monk son. Could that mamak faces the same with his ranting daughter?

Bruno's take of;

'I still remember a friend talking about the young turks in PNB in the eighties.These young educated Malays were smart,uncorrupted and ambitious.Every of these young executives have to always look over their shoulders.Not complacent and made mistakes and the other guy would have climb over you.There was very competitive high standards set up then.Only the very best gets promoted.

Now in the GLC's,one need not be smart,competetive to impressed the boss.One only need to be a ball carrier and political crony to succeed high in the coporate world.That is the reason almost all GLC's are high up to the noses in debts to the EPF.No wonder the country is going to the dogs.'

sums up nicely about the current social quagmire that the Malay M'sians have dug themselves into that hole! Where is the Tun Mohd Ali reincarnation? Or could it be there is none bcoz of the Believe?

Remember - evil triumphs when good man does nothing!

More so, when the evil has cultivated & supported by hp6 sycophants!

Indeed, I'm dying to know where is that yacht built in Turkey moored now?


Anonymous,  21 November 2012 at 10:48  

Dato' and bloggers

I notice a worrying trend in Malaysia that certain public listed companies when they make hefty profit, the owners would privatise them. But when they start losing money or market share, it's time to grind the axe on investors through IPO and get them listed again on the stock exchange. And worse still,the securities Exchange Commission condone such practice. Investors are truly taken for a shocking ride!


dukuhead 21 November 2012 at 11:21  

so much for Malaysia/KLSE being the IPO centre of this side of the Pacific. Poor investors!

KoSong Cafe 21 November 2012 at 12:51  

I chanced upon an episode of ICAC of HK. Though it was fiction, I was amazed at the case involving a senior executive of a company (purchaser) and an old friend supplying sweet corn. I am sure our MACC has more cases involving government corruption than to be involved in private companies. After trailing the suspect, it was found that his bank account has record of substantial receipts. The other party (brought up and educated in US, was unaware that it was considered corruption in paying such secret commissions. Anyway, there was a comment about why someone earning HK$6 million a year would risk his future by taking HK$2 million in illegal commission.

Back to our local situation. I cannot remember anyone being caught for illegal insider tradings which I think must be prevalent. Our perceived corruption in high places are well known yet no big fishes were caught. Complaints were many yet the regulators require police reports or whatever necessary before they can act. Meanwhile, they are content with checking small deals (esp involving opposition leaders) and pretend to be working.

At the moment, those with good connections are having a field day, making hay while the sun shines. Where approvals are concerned, it is a matter of looking after those who matter, and if you are perceived to be well connected, then those in charge will likely agree to your proposals.

Daim stood out as the one who had it all, being Umno Treasurer, Finance Minister and close friend of Dr Mahathir. Whether he was wearing which hat when submitting proposals must have been a puzzle to many.

Anonymous,  21 November 2012 at 16:53  

With bad leaders, rampant corruption, gross mismanagement and our country, as long as one could make an extra $, nobody cares.

Red Alfa 21 November 2012 at 17:22  

Salam Dato'

We now know AnandaKrishnan must also be heartless ... even to the staff of his Astro.

Staff of his Astro was offered (wasn't this a classic cashing out by Ananda?) at recent re-IPO of Astro shares very generous lots at RM 3.00 per share.

His Astro staff who must be thinking too highly of him or his generosity and naively unaware of the greedy opportunists living off the fraudulent going-ons of KL Bursa took bank loans (CIMB, etc offered innovative loan packages to his Astro staff)

Anyone thinks billionaire Ananda and his Astro management will ever care to help his Astro staff as the share price plummets?

umar,  21 November 2012 at 18:23  

Tengku Noone, the first chairman of KLSE got his fingers burnt trading in local shares listed both in KL and Singapore in the late 80s.He became a bankrupt. There were no court cases or whatever .
Tan Koon Swan served his time in jail in Singapore for share -related crimes. The lesson in corporate governance - :Anything good in life is either illegal or immoral !

Anonymous,  21 November 2012 at 18:38  

The listing and delisting of companies are a refined way of surviving cronism. Furthermore, the trading of shares are not for the weak hearted or for one who is unaware of the technicalities and workings of the players state of mind and expectation.
Play the market with what one can afford to lose and not be bothered by the lose But many a person gets greedy and gets burned.
Like fgv, as i stated b4, will hover around 4.60s cos someone up there is losing money just to prop it but rest assured, the market is the deepest ocean where no amount of proping can keep the price up.It will go lower than 3.50 after the elections but till then someone is losing money to keep it afloat.On very low volume.
Ananda Krishnan is a smart bizman, just too good for simpletons to understand.Im not jealous of his moves but am full of awe for his acumen.
He too ,im sure ,feeds 'them' as any bizman does or work comes to a standstill.
Im not shy to say that the first thing any bizman must do is to learn to feed the sharks AT LEAST till PR takes over putrajaya. Till then ,we must feed the sharks or get ripped off.

Sumpitan emas,  21 November 2012 at 19:03  

Bumi-non-malay, view noted with thanks.

Someone should try getting the Brunei Govt to come back to Malaysian stocks again. They went into MAS @ 6.50(?) when their $ was just slightly above par than ours. When they got out @3.50 their $ was about 2.2 times ours. @8.00 someone we all know made it really, really big. Word was Brunei held about 15% at exit time. No wonder rich Bruneians are putting all their money in Singapore stocks where watchdogs are always on the prowl ready to bite.

I must take this opportunity to say thanks to ex-CEO of Minority Shareholders Watchdog Group, En Abdul Wahab Jaafar Sidek for all that he did and tried to do for minority stockholders. No prize for explaining why there is no Dato' (as far as I know) in front of the name. But, as an RMC (1968) alumnus, a highly respected chartered accountant, and cited in a cameo publication, "Endeavours of Excellence - Over 50 Years of Australian Scholarship" produced by the Australian High Commission to celebrate the 50th Anniversary of the Colombo Plan, he obviously doesn’t need further embellishment.

He and men like him must return to bring fresh hope so that all may have enough reason to shout, one day, after 55 years, “AKU mahu hidup seribu tahun lagi”. (Chairil Anwar - Maret 1943).

A great neighbour’s rich history, culture and civilization didn’t quite rub into the souls of the people who matter most in this country.

Or should we read Chairil Anwar’s ‘Nisan’?

Anonymous,  21 November 2012 at 21:57  

Let me give brief history on Ananda K corporate history.
He started as an oil trader.Make a couple of million in one year.He make his first break when he bought Selangor Turf club land for RM$100 mil.He borrow 100% from Bank Bumi.He submit plan to built twin tower and commecial development.After planning approval he sold 51% to Petronal for Rm$650 M.and get Petronal to fund all the development for twin tower.When Tun Mahathir about to retire he sold the balance 49% to Petronal for RM$1.3 billion.No bad with zero capital he make on the land almost Rm$2 billion.His advantages is Mahathir help him all the way.
Mahathir also give him telco licence.This is big licence.He is like another Telcom.He told Effendy Nawawi who owned TV7,With this licence I will be bigger than Telcom Malaysia.He can launch settelite,operate a settelite TV(Astro) and operated Maxis.He told Effendy to sell his TV7 to Media Prima before too late.Now after 17 year you seemwhat Ananda worth with this assets.

In The 1994,when everybody going after IPP,Mahathir give a licence for IPP in Melacca.Beside this ,he is also in oil and Gas.Bumi Armada.
In all this company Ananda is not a directed shareholder.He owned it thro a web of BVi Co.Only Ralf Marshal running the show.That why whe he had problem in India and Indonesia,They authority cannot catch him.Only Ralf have to face the authorities.

my close friend told me in all Ananda companies,Mahathir had a 20% shares thro a company called Yayasan Nusantara.They make Tun Haniff and Raja Arshad as trustee.
When Ananda sold his power plants ti 1MDB forRM$8.5 billions ,he had to pay Rosmah RM$650m.Raja Arshad and Tun Haniff dare not to sign the cheque.they went to see Mahathir and he approved it.

Giong public,and going Private and going public,is accepted pratice,you cannot blame him or other businessman who did it.But in All Ananda ecercise,The Bumi Institution like PNB,tabong Haji,or EPF and KUWP were the sucker.
I was suprise Mahathir go all the way to help Ananda but not Bumi businessman like Halim Saad and Tajuddin Ramli.When they are in trouble,he told Nor Yaakop,kill them?
When Bank Negara in Trouble they asked Tajuddin to help.When election come they asked money from Halim.

The only Malay ,Mahathir help is Syed Mokhtar,But he is an idoit.A bufflow and rice smuggler now become a billionair.Look how much he owed the Bank RM$34 billion.Compare to Ananda he worth RM$ 40 billions.

Anonymous,  21 November 2012 at 22:11  

Saudara bumi non bumi.
Why Goverment had to buy back MAS shares from Tajuddin at RM$8. ?
Tajuddin was askedto save Bank Negara aftNoor Yaakop make huge loses in forex trading.You cant blame him.
But what I dont understand when they bought back his MAS shares,all the money goes to the The company call Naluri Bhd.Almost RM $1 billion.
Tajuddin want to used the money to pay Danaharta and buy back his celcom shares.Noor Yaakup as Second Finance minister asked SC to rejected it.Tajuddin cant pay Danaharta.Nor Yaakop asked Danaharta to sell his Celcom shares to Telekom Malaysia.,and Noor Yaakop give green light for Danaharta to sell Naluri to George Lim with one billion cash imside.George lim wasbthe fugitive and he was thenone who cause perwira habib bank collape with his huge borrowing in 1985 under the company scoth leasing.He came back,become a muslim,his Name now Adam Abdullah,bought Naluri for RM$350 m using another company Atlan Bhd.,with RM$1 billion cash.Not bad.They why Tajuddin sue Danaharta,CIMB,Noor Yaakop and the rest.
For RM$ 13 billion.

That why Nazri asked them to settle.He got a strong case.

Anonymous,  21 November 2012 at 22:30  

Making maney from stock market in Malaysia vary easy.

When Tengku Razaleigh as Finance Minister,Tan Sri Khoo Key Peng as his close friend make amlot of money.

When Daim as Finance minister, all his boys like Halim,Tajuddin,Amin Shah,Wan Azmi,Razaligh Rahman,they make amlot of money.But when Daim had a problem with Mahathir afterbthey sack Anwar,Tun Mahathir kill all Daim boys.
Halim Saad ,the riches businessman at that time was force to sell his empire by Mahathir/Noor Yaakop,to Khazanah for only RM$165 million only.Noe Halim a poor man,had to borrow. From Bank to do new business.

Same with Tajuddin and Amin Shah.They cannnot touch Wan Azmi because he chose o live in London.

Now Mahathir talking about helping malay Businessman.
do you think he not a hypocrite.

When his son Mirzan was in trouble with his shipping co,Konsotium Perkapalan,Mahathir asked Anwar to get Petronas thro MISC to help him.When Mirzan want a higher valuation,MISC had a problem.The Late Dato Yassin ,MISC MD,told in his face"awak ingat MISC bapak bapak awak punya Co"I am sure he must have reported to his father.
MISC only want to,pay RM$ 950 m but Mirzan want RM$1.3 billion inorder to cover his cost.
Anwar agree to his request after Hasan Marican told Anwar jagan cari pasal,Dia anak Boss.MISC is not your company?

What happen after the deal.MIrzan give an interview to AWSJ he he said Konsotioun Petkapalan make RM$350 after disposing his asset to MISC.

Anwar was vary upset.He took the AWSJ paper,went to see Mahathir,and told him,you and your son are lier.Mahathir was vary upset.He call Daim and asked him to fixed Anwar.
The rest are history.

umar,  22 November 2012 at 03:47  

Someone wondered why Mahathir helped Ananda all the way and not any malay businessmen.
Reason- AK was supporting Mahathir's kids in London when Mahathir was sacked from UMNO by Tunku after his Malay Dilemma and May1969. Mahathir's family was safe in Anandha's care.
So, in return mahathir gave him all the monopoly business such as Race Course ( totalisor Board ) , Satellite TV BROADCASTING, Tanjung power, Maxis, Astro, KLCC ETC.
It was returning favours given during his bad days in political wilderness by a trusted ally..

Anonymous,  22 November 2012 at 08:58  

Old man also sakit same say Malay sakit -senang lupa - but ingat friend help. xxx, Eon Bank, dulu Kedah Cement help. That why EON not kacau big bank telan small bank time. He also directer Pan Pacific KL, now no more. Heard big UMNO gengtars telan semua.

Anonymous,  22 November 2012 at 12:33  

I was sitting in the next row, behind Allahyarham Tan Sri Murad Mohd Noor on a flight from Jakarta to KL and overheard his conversation with a "Datuk" who sat next to him about Ananda and Mahathir.

TSMMN told that Datuk…..after retirement, Tun Mahathir used to carry on with his habit of borrowing Ananda's Falcon 900 private jet .........until one day TDM was asked to fill up a form , stating where he is going and for what reason before he could use the jet.

Kalau cerita TSMMN tu betul saya cuma nak kata "PADAN MUKA HANG CHE DET WOIII!"

From that moment, Mahathir had stop using Ananda's jet. Now Syed Mokhtar pays for his trips.

walla 22 November 2012 at 17:32  

"Now Syed Mokhtar pays for his trips."

In his recent biography, Syed Mokhtar said he was ushered into Mahathir's office to show his proposals for Kedah; during the meeting, the PM of those 22 years said not a word. Later he got a call from the man who only said, "The matter is settled".

That office must have been worth billions per sq ft.

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