Big Shareholder Ceased the HOLDINGS! Is this good or bad for the COMPANY?

Publish date: Mon, 15 Aug 2022, 05:39 PM

Question: What is considered “big shareholder”?

Answer: A “substantial shareholder”.

According to Section 136 of the Companies Act 2016, a substantial shareholder is defined as: A person who has an interest in one or more voting shares in a company and the number or the aggregate number of such shares is not less than 5% of the total number of all the voting shares included in the company.

In most cases, the substantial shareholder will be the “guidance” of investors focus as they must held a strong conviction for the company to hold more than 5% of the total number of all the voting shares included in a company.

Generally, a reduce in shareholding of substantial shareholder is “bad” and increased shareholding is “good”.

But is it really so …?

In the snapshot provided above, we can clearly see that GREEN PACKET BERHAD had ceased to be the substantial shareholder of G3 GLOBAL BERHAD.

Normally, a cessation of substantial shareholder would invoke the fear emotion in the investment community but things were calm for G3 GLOBAL as shown in the price chart below.

And as you can see, the financial performance of GREEN PACKET was not outstanding, to say the least.

In Q1FY22, GREEN PACKET had reportedly only left with RM41.0 million cash on hand despite the company were once in the billion dollar club years ago. They were also forced to raise fund via private placement in May 2022 in order to finance their operations.

So in other words, GREEN PACKET were by no means in good financial position.

This should explain why the company is eager to dispose G3 GLOBAL shares via Direct Business Transaction or DBT over the week after their massive warrant conversion.

Seasoned investors may also be happy for G3 GLOBAL as GREEN PACKET do not have a good reputation in the stock market anymore as compared to years ago.

All in all, I see “neutral” proposition for G3 GLOBAL currently for the cessation of substantial shareholder. Maybe even slightly positive as the share price reacted well after the cessation.

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