I guess this is a pretty good warning to speculators in the stock market because anything can really go wrong in the last minute. There was so much hope and all, but at the end of the day, not only did they not get their quick buck, they would have lost quite a fair bit too. Reading the article on how things unfolded in the last minute is quite amazing – not that I am gleeful over what happened, but it’s just… how amazing that something that seemed so right could go wrong.

In fact, as I finished the article, I could almost relate other parts of my life to this. Do you believe in Murphy?

INVESTOR Mr Tay is hopping mad. He was as close to a sure thing as you can get in the stock market and now he is down about $1 million.

He is sorely embarrassed, given that he works in the financial industry and is no novice investor. No wonder he does not want his full name in the paper.

Five of his friends are in the same boat, all floating on a $5 million sea of red ink. The Omni Partners fund is all at sea on the same ocean, down $8 million over a similar gamble.

The cause of their anger is a tiny-tot firm called Jade Technologies and an aborted buyout that has turned into a corporate debacle.

It has raised all sorts of awkward questions from out-of-pocket investors like Mr Tay, questions about the millionaire who launched the takeover and the roles of his financial adviser OCBC.

It could also become a test case for investors hoping to get some compensation.

The drama centres on Dr Anthony Soh, a medical doctor-turned-entrepreneur who became Jade’s largest shareholder last May.

He quickly shook up the firm with plans to sell its precision engineering unit while venturing into coal mining and commodities.

Last October, he pledged about 140 million shares with an Australian broker, Opes Prime, to secure a $25 million loan. When Jade stock began falling, he had to pledge a further 150 million shares.

In February, he launched a takeover, offering 22.5 cents a share. He also stated that he already held about 45.97 per cent. Recent statements indicate he believed then that the pledged shares were still technically his.

OCBC also stated that he had sufficient money to buy Jade. All looked to be on track.

The shares were trading at 22 cents and as the buyout was almost certain to succeed investors piled in, expecting to pick up the half-a-cent margin.

Everyone looked a winner; what could go wrong?

Opes Prime going bust, that’s what. It went into receivership on March 27 and its creditors – ANZ Bank and Merrill Lynch – seized the assets, which included huge quantities of pledged shares.

That forced Dr Soh to tell the Singapore Exchange last Tuesday, close to midnight, that the shares were no longer his. On Saturday, he withdrew his offer as he had insufficient funds to pay for the buyout.

Inevitably Jade shares plunged on Monday, down 70.5 per cent to 6.5 cents. They closed at 8.5 cents yesterday.

Mr Tay and his friends, who had bought 30 million shares, are seeing red and blaming Dr Soh. They say he should have declared that his shares had been pledged.

Yet the rules – written and unwritten – of financial markets are not so clear-cut. A lawyer told The Straits Times that in takeovers, it is common for the buyer to pledge his shares to secure a loan.

It is also common for the buyer to keep that to himself, otherwise hedge funds will swoop in and try to trade on these shares.

But Dr Soh has admitted that he did not read the fine print when he pledged his shares with Opes and had no idea they could be seized.

Brokerages work differently from banks and it appears Merrill Lynch and ANZ had the right to seize all the shares to cover their losses. Dr Soh could only watch as his 295.5 million Jade shares were put in someone else’s kitty. On last week’s prices, that amounted to $65 million.

This points to another oddity. Merrill Lynch had seized 256.84 Jade shares and sold 95.3 million last week while the price was still around 22 cents. A smart move, given how Jade tanked this week, but it did not disclose that key fact until Wednesday.

That has not helped the mood among other investors, who also have a bone to pick with OCBC, the financial adviser.

They ask why the bank said Dr Soh had enough funds when it later emerged that he did not. They say OCBC’s stamp of approval lured more investors.

OCBC has now filed a report to the white-collar crime-buster Commercial Affairs Department, adding that there were various events that led it to question the truth of assurances it received.

The Securities Industry Council, which polices takeovers and allowed Dr Soh to withdraw the deal on Saturday, is investigating.

Meanwhile, aggrieved investors are licking their wounds and asking how a buyout offer could be withdrawn so easily.

Sure winners turning into dead losses, a company boss down $65 million because he did not read the fine print, a bankrupt Australian broker, disclosures made in the dead of night. Could it get any more bizarre?

Yes, indeed. Enter Mr Mick Gatto, an imposing Aussie bloke acquitted of a gangland killing in Melbourne in 2005 who is now on a mission to find the missing Opes millions for clients Down Under.

Mr Gatto and two burly associates flew here this week, set up at the Shangri-la Hotel and had a chat with anyone who might have a lead.

He told ABC: ‘We’re just going to give it our best shot and hopefully we can recover whatever we can.’

Perhaps Mr Tay might like some help as well.

sushyan@sph.com.sg

Article obtained from straitstimes.com on 11th April 2008 – thank God it’s Friday (small "g" in "God" if you don’t believe in just 1 God)



Reader's Comments

  1. Chin Yong | April 11th, 2008 at 6:09 pm

    He told ABC: ‘We’re just going to give it our best shot and hopefully we can recover whatever we can.’

    ABC? What is that?

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