Monday, May 6, 2019

Spotlight on the Singapore Regulators ( Hyflux Case) - SGX, MAS - An Opinion

Disclaimer: I am not an investment advisor or lawyer. 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.

On 12 June 2018, i sent an enquiry email to Singapore Exchange (SGX) , Monetary Authority of Singapore ( MAS) and Securities Investors Association (Singapore) SIAS  on whether there were any grounds for enforcement action against Hyflux Board of Directors based on the Shares Purchase Mandate.  I attached a printscreen showing Point (B) and Point(C) as per the picture below to substantiate my query.  This is from the Annual Report 2014.

Image 1
In the green box above under Point (A), it was clearly stated that the highest price paid for the share buyback was $1.01 per share and the lowest price paid was $0.84 per share in 2014.

Image 2

Image 3

Image 2 and 3 shows the reply to my email enquiry. This was Cced to the Monetary Authority of Singapore (MAS). It stated that Hyflux bought shares below the net asset value per share. This is factually wrong. Any annual report post-2014 would have shown the NAV per share of Hyflux in 2014 was $0.56 and opening up the annual report of 2014 which i referred to would have shown that the lowest buyback price paid was $0.84 per share in 2014 as per Point(A) in image 1.

I replied again to substantiate with evidences and asked a simple question to show me just one example where Hyflux bought below the net asset value as asserted by SGX. This was the email i replied SGX with. I sent the specific page in Annual Report 2017 showing the NAV per share of Hyflux across the years as an attachment. MAS and SIAs is Cced in this too.

Image 4
Image 5
The above shows the Net Asset Value per share (cents) in 2014. Clearly, it was $0.56 per share in 2014.

My comments

The regulators in Singapore are clearly hopeless. Their response gives me the impression that their first instinct would be to jump to the defence of corporations without even doing a basic fact check . What use is a guard dog if it doesn't do its job of guarding the house? It's so blatant considering i have made it very easy for them by giving them the facts already.

To me, it is even worse that Hyflux was in the news already that they were in dire straits and this should naturally necessitate that the regulators should be on high alert on possible breaches or pending investigations.

It is clearly stated in Image 1 Point (A) that the highest and lowest share buyback price was $1.01 and $0.84 per share respectively. It only needed the regulator two minutes of their time to check out the NAV in 2014 by pulling out any of Hyflux's annual report to check like in Image 5. But i guess they couldn't afford the time or maybe just couldn't care.

Clearly, this shows the uselessness of SGX. By the way, the shares were bought back above their NAV per share from 2011 and 2015, every single year.

The Monetary Authority of Singapore (MAS) was also included in all the emails. They delegated the enquiry to SGX as they stated SGX was the frontline regulator. They said they will monitor SGX's response.  I wonder what happened with monitoring SGX's pathetically wrong factual information given to me.

I also wonder what was the accountability mete out upon SGX? Did MAS really monitor in the first place?

I think the following statements is very apt.

".............When shareholders and other stakeholders “blow the whistle” on potential misconduct to regulators and provide substantial evidence to support their allegations, regulators must take these complaints seriously. Regulators should not only investigate when incontrovertible evidence has been provided by whistleblowers, who lack resources and investigatory powers themselves.

We often hear regulators talking about different stakeholders playing their role in improving market integrity. If stakeholders’ efforts in highlighting possible misconduct do not get the necessary support from regulators, they will stop doing it and the market will be the worse for it. 

I am concerned about the loss of trust in our market and urge that more be done to improve regulatory enforcement to rebuild that trust. "  - NUS Professor Mak Yuan Teen ( Emphasis mine)

Guess what was SGX final response to my email (Image 4)?

They could not give a single example when Hyflux bought their shares back below the NAV per share. Choosing instead to ignore that question and carry on life as usual.

And very ridiculously, the Company that i am lodging a complain against answered my query. I wondered if SGX checked on the validity of the reply. Oh but wait... this time, SGX replied to me without Ccing MAS. I wonder how MAS is able to monitor SGX in this case.....

The complacency and arrogance of the current system is appalling. There is totally no accountability , no check and balances with CEOs also being Chairman as in the case of Hyflux and with unwilling regulators. SIAs remained silent throughout the email, in case you are wondering.

Retail investors, just remember, you are on your own in Singapore. 

More to come...surely...stay tuned.....

To Noble Investors
I have just created a Noble Telegram group for Noble Investors to join. In my opinion, Noble investors are a less unlucky bunch compared to Hyflux because it has Big players on their side. Iceberg has set up a webpage to join them in the lawsuit.  I have also reached out to Iceberg and they have responded positively to me.

I am not a Noble Investor and i do not know the specifics of the suit, but i thought the old saying of
"Strength in numbers. Divided we fall, United we stand" is wise. I do not know if it will succeed but let's see how it goes.

To Hyflux Investors
For Hyflux investors, even those ordinary shareholders, we need you.  Hyflux posted an announcement on 3 May 2019, finally revealing the name of the mystery new  investor, albeit, still a non-binding offer. In it, it stated the current management will be retained. In the recent extension of court moratorium, Hyflux proposed a New Hyflux and Old Hyflux arrangement. This reminds me of what Iceberg said in May 2015 on their website about Noble.

 “The new Noble looks a lot like the old Noble: same management, same director (Elman), about the same financing costs,”

The Hyflux ordinary shareholders hold about 60% voting rights. An extremely uphill battle to vote out the current management definitely, but its worth a shot. And to put things in perspective, at least Noble Chairman Richard Elman stepped down eventually. Noble's Board of Directors, CEO and CFO were also changed, finally, at the very end. How about Olivia Lum (Chairman and CEO) and Lim Suat Wah (CFO)? 

For Other Investors of other companies
A level playing field between corporations and retail investors can only be good for everyone. In a large scattered group, differing messages will be sent out. I can only speak for myself. It is the corporate entities and significant stakeholders whom accountability and recovery from is seeked. Understanding what happened along the way was also necessary in the process of reaching my conclusion.
I hope you read it the right way.

Further reading
1) Considerations about Hyflux
2) The fate of Hyflux
3)Will Hyflux recover? The billion dollar question
4) Hyflux-Treatmeat of perpetual share holders- Ezion
5) Hyflux - loans and borrowings - Pacific Radiance
6)A happy ending for retail perpertual securities holders - Tiger Air and Hyflux
7) The Very Curious Case of Sharebuybacks- Hyflux
8)What did the founder/Chairwoman/CEO do to help hyflux throughout the years
9) Moving forwards at the Townhall meetings with Hyflux - Part 1
10) Moving forward at the Townhall meeting with Hyflux - Part 2
11)The Lucky Accredited Investors of Hyflux's Perpetual Securities - Part 3
12) The Peculiar Case of HyfluxShop - Question 12 
13)Uncovering the Real Motivations Behind the HyfluxShop 
14) High Level Staff Movement Indication of Red Flags -Hyflux
15)An industry comparison of Hyflux compared with its peers - Question 15
16)What other Water Companies did that Hyflux didn't - Question 16
17)Why a debt to equity option for retail investors is not right
18) Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux
19)Consolidated Questions For Hyflux Townhall Meeting on 19 and 20 July 2018 - Hyflux- continued
20)Informal Steering Committee for the Reorganisation Process - Hyflux
21) What happened to other Debt Restructuring Exercises - Ausgroup
22)What happened to other Debt Restructuring Exercises - Nam Cheong
23) My layman views of the so-called " White Knights of Hyflux"
24) The Unsecured Working Group (UWG) are against the retail investors - Hyflux
25)Where to find money to pay back retail investors? 
26)What happened at Hyflux's Second Townhall Meeting
27) Another bomb to the retail investors of Hyflux
28)The Underrated Importance of Regulatory Risk - Hyflux
29)The Overlooked Importance of Another Regulatory Risk - Hyflux
30)Why did so many Singaporeans invest in Hyflux - The positive image illusion
31)On Why The Rich Get Richer And Poor Gets Poorer - The Hyflux Proposal is Out!
32)The " not spoken much" dirty little thing about the Restructuring Proposal - the $33 million - Hyflux
33) The Failure of the much touted Public-Private-Partnership Model in Singapore - Hyflux
40)How Effective are SGX Listing Rules Really ? - Hyflux
41)The Liquidation of California Fitness and the case of Hyflux
42) Protection of Retail Investors in Singapore - Hyflux and Noble

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