Sino Environment Technology is a S-Chip whose trading has been suspended since September this year.
I seldom write about Singapore listed China stocks as I don’t have any personal interest in them. The Confession of a S-Chip CEO email that I read the other day rekindled my interest in this topic so I thought I will post some updates of the latest S-Chip scandal that is going on involving Sino Environment.
Signs of irregularities for Sino Environment first appeared in March this year when it was discovered that their CEO, Sun Jiangrong, had defaulted on his personal loan of S$120 million. This would usually not be a direct problem of the company, but the CEO in this case had pledged his own shares in Sino Environment as collateral for the personal loan.
This was actually a smart way of monetizing one’s own shares without actually selling them. Yet, no disclosure of the pledge of shares was needed to be made to SGX at the point when the loan was taken.
Sun’s shares were subsequently seized and sold off to pay for the loan. This triggered a potential early redemption of the company’s own S$149 million convertible bond, which the company might have problems paying. Auditors expressed concerned on the company’s going concern at this point.
In May, nTan Corporate Advisory was appointed as IFA and PwC was hired to review the cash transactions of the company. There were also some tussles involving the CFO, executive directors and independent directors.
Things got real bad in October when it was announced that PwC found questionable cash transactions. You can read what PwC actually went through and found in this report:
It looks likely that money has been siphoned from the company. The bank branch representatives also seemed to be in cahoots with the company! You will never expect such a thing to happen in Singapore.
At this point, it is still not clear what SGX can do to bring the company’s board to task or protect the assets of the company from being stolen from the shareholders. Threats of delisting (which has been issued) would probably not be effective enough.
David Gerald, president of Singapore Investors Association of Singapore (SIAS), has approached the Chinese embassy in Singapore to conduct a thorough investigation into this company’s affairs in China.
To cut a long story story, shareholders in Sino Environment have been taken for a ride big time.
Some minority shareholders have wanted to come together and gather enough votes to call for an extraordinary general meeting (EGM) to iron out issues facing the company (You can email [email protected] to contact the group).
This won’t be needed anymore as the independent directors have just filed an application to the Supreme Court in Singapore yesterday to call for an EGM (among many other things). I am sure the independent directors are not having an easy time now. It is them against the executive directors. You can read the application announcement here:
This would be a real test case involving a S-chip on how well a court order issued in Singapore can be enforced in China. Singapore and China, by the way, do not have an extradition treaty in place.