Jay's market diary
Reach Energy: It’s time for shareholders to vote against management who doesn’t respect their votes
Another adjournment
This is the second time we saw an adjournment, first one was SONA when apparently the management couldn’t get the QA through with enough votes. This is a very bad sign for Reach. According to news sources, 208m have voted against the QA through proxy votes. Recall that Reach raised RM750m through issuance of 1 billion new shares. Only these 1b shares have voting power, so now if 208m have voted against, they need at least 624m out of 792m remaining votes on their side. And if the No camp manage to attract another 43m votes, then all is over.
Attempt to frustrate minority shareholders
It's another dark day for Malaysia's corporate governance. When QA fails, shareholders will eventually still get back their cash value. It’s only the management that will lose out where their shares become waste paper and they get nothing else other than the salaries they earned for the past 2 years. The notion that management can just arrange for EGM to be adjourned when shareholders voted against management's wishes sets a very bad example.
From the calculations above, it is clear that the odds are stacked against the management. So you may ask what’s the point of adjournment? It’s point blank to frustrate the minorities. Hopefully some of those who voted no will get lazy this time in filling up proxy forms and/or they go whip up some sleeping shareholders to vote yes. It simply adds to the time, cost at the expense and inconvenience of the shareholders. In my previous article on SONA, I likened this to 2 person playing video games and the losing one simply restarted the game. It’s because continue, he will lose, after restart he may also lose but at least he gets another shot. Is it fair for the other player? Clearly it’s not.
Respect the game rules
For the past few months, we saw Reach going all out to woo investors to vote yes. But all is fair and square. It’s not illegal or unethical to promote your views. Management clearly thinks that the QA is good deal and there’s nothing wrong to try to attract support. It’s all within the rules of the game.
The management is also aware of the 75% vote threshold, which is why they tried to get institutional shareholders on board and buyout some big yield investors. Again it’s within the rules.
But what is against the spirit of the rules is when you have done all the above and you still fail to get the QA through, you simply adjourn the meeting. If the management can do this, next time if it becomes a full-fledged company, will they pull the same stunt when in the future shareholders’ vote against their other business proposals? Management that doesn’t respect minority shareholders have no business managing a SPAC which its essential foundation is trust. Maybe SC next time should consider this quality when they vet management of new SPACs or simply outlaw this kind of delaying tactics.
But is it fair for 25% votes to derail the whole QA?
Yes because just like other special resolutions, these are special issues that should require almost unanimous votes to protect minority shareholders. And management was well aware of this rule before they were listed. They were happy when raising funds based on nothing but some personal profiles so when the rules work against them, they have no right to argue against.
Vote against the QA for the sake of corporate governance
Just to clarify, I did own Reach shares but I have sold them off quite some time ago. So I’m urging shareholders to vote against the QA not for any sinister purpose, but to show a clear signal to the management that shareholders cannot be just steamrolled into submission. There are enough cases in corporate Malaysia where major shareholders or management acted against minority interest. This is another rare chance for minority shareholders to show up and vote for your own benefit.
I actually commended Reach management few weeks back for doing all they have done to try to secure enough votes, unlike CLIQ who can’t even submit complete documents or SONA who was so arrogant by doing nothing and hope that shareholders would vote Yes. But after all is said and done, Reach management has failed. When you fail, you accept the results, not delay it, not hide it. You fought and you lost, so respect the other side’s decision.
Bottom line, come next EGM, minorities please vote and let your voices be heard!
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Discussions
Be the first to like this. Showing 23 of 23 comments
All these spac r monkey biz...just that msian investors outsmart these conmen...by voting no n get back their cash..
2016-11-04 22:38
Actually MTD & gang did not vote....bcos they want to vote on the spot ...instead of by proxy loh....!!
But the meeting adjourned, thus did not votes loh...!!
If MTD n Gang voted....they will be additional 250 million yes votes...but that could not...even make the QA success loh....!!
2016-11-04 22:42
Spac stupid people all conned. That's the meaning. What the hell you thought it meant?
2016-11-04 22:44
Told you guys so earlier, the stock movement already denote that it will failed...................push up on the day and later in the evening down to the lowest for warrants and mother.
Monday, the warrant will take a hit severely and spiralled into oblivion.
For the mother holders............it is win situation and can accumulate more since the payout next year could be worth more......perhaps around 0.77sen.
2016-11-05 08:41
The SPAC is not monkey biz...................just that some stupid regulation.....75% votes required to the QA.................this ruling should be scrapped or lower down.
2016-11-05 08:43
It would be more sensible if the SPAC rules require 2/3 instead of 3/4 approval level.
2016-11-05 09:13
Do u really want them to invest your money in Kazakhstan or Turkmenistan etc etc
2016-11-05 10:27
75% is to protect minority, just like 90% for compulsory takeover
SPAC is a peculiar structure. logic would tell us that it's not easy to get good assets at bargain price. it not just involve management skills but also dealing and bargaining skills but all would not matter if no opportunities are available
reach management thinks it is a great QA as oil price will rebound. but what if oil price remain around this level for the next few years, would it still be a great buy? no one knows the future so no one can answer. what we do know that they have huge number of diluting warrants which doesn't help
remember the old times when Cliq and Sona traded above their cash value. there's no issue of yield investors, simply because there's no arbitrage opportunities. the fact that market values these SPACs so lowly is a reflection of market's loss in confidence of the SPAC structure
ideally for a SPAC to be successful is to be involved in biz which needs little capital and can generate extremely high margins and returns. but if that's the case, they wouldn't have gone for listing in the first place. there's a reason why SPAC didn't kick off in many countries, just hope our SC can learn from this before introducing all those fancy schemes...
2016-11-05 15:13
What is there to learn ??
If a spac fail means it fail loh....just like listed company not all will succeed mah...!!
The key is protection, disclosure and risk management mah....!!
Investors know what they are doing loh...!!
The fact the independent reach holders vote agst the rich corp like MTD, despite various promotion for YES...indicate SPAC is working and independent investors know how to protect themselves and their rights loh......!!
2016-11-05 15:24
Hi, just wondering if i bought Reach's shares on Friday, am i entitled to vote in the next EGM?
Your response would be highly appreciated.
Thank you.
2016-11-05 16:42
Jay, SPAC has sufficient minorities protection as it allows dissenting shareholders to cash out via share repurchase. However, if the QA fails to receive 75% approval, then even dissenting shareholders couldn't get back the money that belongs to them until after liquidation. As a dissenting shareholder I would prefer the QA is approved.
2016-11-05 20:02
Posted by acadi > Nov 6, 2016 02:30 AM | Report Abuse
This is a personal scenario that I have put together after reading this forum till now and today's news report (the Star/Business).Very interestin facts/figures. Of course I stand to be corrected.
Total no of shares : 1.28B
Total elegible to vote : 1.28 X 0.8 = 1.022B
Known via proxy submited to company : 72 person @ 56M (YES) : 56m/1.022B = 5.4795% (a)
154 person @ 208M(N)) : 208M/1.022B = 20.3522% (b)
Stated in The Star : 1) MTD Cap : 28%/80% --------->> 35% (c)
2) Tabung H : 8%/80%----------->> 10% (d)
3) MKW Jaya : 3.54%/80%------------>> 4.425% (e)
4) SMB : 4.7%/80%------------->> 5.875% (f)
5) Siva : 5%/80%------------->> 6.25% (g)
Total 1-5 = 61.55%
Addiing a,b,c,d,e,f,g total is = 87.3817%
RAIDER SAYS THE ABOVE ANALYSIS IS FRAUGHT WITH ERRORS LOH...EXAMPLE HOW U KNOW C...D...E...F AND G NOT INSIDE A & B ??
Balance of 100% = 100% - 87.3817% = 12.6183% consisting of other shareholders
whose stance is not know(whether yes or no) or even bothered with
the EGM.
IF we ASSUME that from MTD to Siva are all in the YES group and ( none are in the NO known group by proxy ; A position I believe to be as the numbers here seems to indicate so) , then the yes percentage is
5.4795% (known from proxy) + 61.55% = 67.0295% (therefore short by only 7.9705%)
AGAIN RAIDER ASK ALL THE SHAREHOLDER LISTED C TO G...ASSUME THAT NOT INSIDE A & B ALREADY VOTED....HOW U KNOW ALL WILL VOTE FOR YES ??
PROBABILITY IS SOME WILL VOTE FOR YES AND SOME NO LOH...!!
However, as I have shown above there is still a 12.618% that has not shown its colour yet. I notice Tankhaylong mentioning about a crossing of 19.09M (1.867% small but not insignificant under the present scenario) on friday. If true (I assume it will be YES group), then the shortfall will be reduce to 6.103%.
RAIDER ASK U LAH...THE CROSSING AFTER PAG DEAL OF RM 0.76 A HIGH % IS EITHER YES OR FENCE SITTER VOTES LOH...!!
VERY SIMPLE THE NO VOTER ALREADY MAKE UP THEIR MIND TO VOTE NO LOH...BCOS THEY ARE PLANNING TO GET BACK RM 0.76 IF QA IS SUCCESSFUL OR RM 0.785 WHEN SPAC EXPIRE BY VOTING NO MAH...!!
OPiNION:
I would also assume that the YES group has a few (3% - 5%) percentage of interest in the "Balance of 100% group) parked under nominees' trading accounts .Watchout for some buying interest in the cash market on mon/tues (total of say 3-5% for the two days) or a crossover of the same magnitude. If these event takes place, the chances of making everyone will become a reality.
Last word: for all we know the YES may already have the 8% parked in the Balance of 100% gropu
I stand to be corrected. Good luck to all.
RAIDER SAYS BASED ON FIGURE QA SUCCESS IS A DAUNTING TASK LOH...!!
ALREADY 208M HAS APPOINTED THE CHAIRMAN TO VOTE NO....!!
THEN AGAIN ANOTHER 60M TO 100M ARE PLANNING TO VOTE NO ON THEIR OWN...BUT PREVENTED TO DO SO BCOS MEETING ADJOURNED...!!
THEREFORE TAKE LOWER FIGURE....THAT MEANS 268M VOTES AGAINST LOH...!!
YES NEED TO GET 804M YES VOTES...THE CURRENT OFFICIAL YES VOTES ONLY 56M MAH....!!
OF COURSE AS A DISSENTING SHAREHOLDERS WE PREFER THE QA APPROVE MAH..!!
BUT THE PROBLEM IS THAT THERE ARE TOO MANY DISSENTING SHAREHOLDERS LOH...!!
THUS IT IS LIKELY REACH WILL SUFFER THE SAME FATE AS CLIQ AND SONA ON THE ROUTE OF LIQUIDATION LOH..!!
2016-11-06 09:52
dont count the chicks bfore hatches
some ulars said support during EGM but vote otherwise
haha, watch out for ulars
anyway, dont think can get 75% votes unless more & more cash for buyout
2016-11-06 10:16
just look at how much warrants listed you will know how much eligible shares are there bcos it's 1 for 1 free warrant, so 1b warrants means 1b shares.
minorities shareholders who vote NO will be protected by cashing out. but those minorities that voted YES will be stuck with this management and the subsequent hanky pankies
I'm guessing the management will ask MTD next week to go sapu more shares from yield investors at 76c. to do that, MTD probably will ask for more goodies like the placement which the management has no bargaining power to reject. so the major shareholders will benefit more while minorities who stay will suffer
2016-11-06 17:12
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