Wednesday, June 13, 2018

The Peculiar Case of HyfluxShop - Question 12

I still don't understand why the CEO/Chairwoman/ Founder has to venture into HyfluxShop.
I mean, isn't the electricity market, the business in the middle east and being on the board of directors of ST Engineering enough on her plate?

Why do :

1) A dividend-in-specie of HyfluxShop, 
2) An offer to buy over the HyfluxShop shares and 
3)then within 3 months, suspend Hyflux and ask the court for protection?

Disclaimer: I am not an investment advisor. Heck, i am not even working in the financial industry. Below are my interpretation and i am grateful if you will let me know if anything i say is wrong and i will correct it in a reasonable time. I am not an expert and don't wish to be assumed to be one. I make losses frequently.

CEO/Chairwoman/Founder Offer to buy Hyflux Shop from existing shareholders.

In summary, ordinary  Hyflux shareholders ( code:600) were given a dividend-in- specie of HyfluxShop shares in January 2018. (See here). In February 2018, CEO/Chairwoman/Founder offered to buy over the HyfluxShop shares from the ordinary Hyflux shareholders. 

Take note that HyfluxShop is unlisted and it wouldn't be unreasonable to guess that many Hyflux shareholders would accept her offer. 

As of now, it is still unclear how many ordinary Hyflux shareholders accepted her offer. But, as of the offer statement by  CEO/Chairwoman/Founder in February, she controlled 54.2% of HyfluxShop through direct and deemed interest.

A large shareholder in both Hyflux and HyfluxShop

As of February 2018, CEO/Chairwoman/Founder controlled about 34% of Hyflux and 54% of HyfluxShop, effectively having considerable influence in both entities. 

Now, it was stated in the offer document that HyfluxShop has issued $20 million worth of perpetual securities to Hyflux at a rate of 6% pa with terms having an uncanny familiarity with the N2H and BTWZ ones.

This is certainly peculiar to my layman mind.

And the lucky draw of a BMW3 series and $150,000 of cash on the HyfluxShop pisses me this where the $20 million went?
And you know what? Compare and to compare the very visible difference in allocation of capital to promotions.

Hyflux "lent" money to HyfluxShop with no obligation to pay back the money. ( Like BTWZ and N2H)
CEO/Chairwoman/ Founder exerts considerable influence over both entities.  
Due to her offer of HyfluxShop shares ,she would control HyfluxShop considerably more assuming she gets many acceptance of her offer. 
Let's say she gets full control of HyfluxShop such that it becomes solely hers,  does she get the $20 million without the need to "return" it.

Since she is the largest shareholder of Hyflux, will she have the motivation to demand the $20 million to be returned? 

Is this an arm's length transaction or a transaction with a conflict of interest? 
I don't know as im just a layman with unqualified experience and just wondering.

Now to question 12.....

Question 12

How much of HyfluxShop does Olivia control now , taking into account the number of people who accepted her offer?

Will HyfluxShop become a completely independent Entity of Hyflux once she gets enough of the Hyflux shares and would she buy over Hyflux's stake of HyfluxShop too? 
( I don't understand thats why i ask.)

How must HyfluxShop fare before the $20 million will be returned to Hyflux? How will we know since it's an unlisted entity and it's financial statements are not opened to public?

If Hyflux were to be liquidated ( touch wood) and cease to exist, will the $20 million need to be paid back?

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