@speakup Who have been buying and chasing up the prices? COL has not been buying for the past few days, so there are those who bought at all time highs thinking that good times are coming with the new dividend policy.

One of the most important listing rules of Bursa is the timely release of price sensitive information. Since the so-called new dividend policy is going to take care of the price discount problem, by definition, this is price sensitive. So either the company already has it, or don't, no such thing as akan datang. This is not like buying a new business that need to do due diligence and all the various approvals from the authorities. Here, just needs the board's approval and you are good to go. Releasing a 'teaser' is definitely against the spirit of the rule, and put undue uncertainties to the share price, unless the objective is to influence the share price?

@Integrity The last time some one tried, TTB threatened to resign!

Try explaining this to the shareholders who sold at low prices during the injunction period.

By stopping COL from buying with the injunction, the company has been mainly responsible for the prolonged deep discount of the share price until the end of the litigation recently.

This is a summary of COL’s recent share purchases as percentage of daily turnover
Date Total COL %
16-Aug 433,000 338,500 78%
15-Aug 384,000 162,600 42%
10-Aug 146,000 136,000 93%
7-Aug 115,800 79,000 68%
Total 1,078,800 716,100 66%
Proof that COL's buying caused the narrowing of the price discount instead of widening it as alleged?

Shareholders have yet to be told how the previous dual listing exercise, which ended up costing the company millions, was supposed to help reduce the share price discount. I can't help but have the deja vu feeling with this yet to be announced dividend policy.

The other unorthodox financial statement is the "low risk high returns" stock, which runs counter to the Capital Asset Pricing Model, a foundational concept in modern finance, the relationship between risks and returns.

Yes, correct, still relevant today after more than 50 years. But unfortunately, much less well known here than Mr. TTB.

For those who may be attending the upcoming AGM, here is the link to the company's constitution: https://www.dropbox.com/scl/fi/mvdd2blwiqehifymvdm7d/iCap-constitution.pdf?rlkey=o8bdchmdda7gjp3qz9ume3adc&dl=0

For example, if the share is trading at a 40% discount and the cash content is $1, if this $1 is distributed as dividend, the 40 sen discount attributed to it should be taken off the share price, resulting in a reduction of the discount, i.e. the ex dividend reduction in the share price should be less than the dividend declared.

The only exception, in iCap's case, is the very high cash content, which should not be subject to the huge price discount. So if this is paid out in dividend, there should be a theoretical reduction in the price discount since the cash dividend in the hands of shareholders should no longer be discounted.

My finance professor's Nobel Prize winning M&M Dividend Irrelevance Theorem in its simplest terms, states that in a world with no taxes, transaction costs, or asymmetric information, the dividend policy of a company should not affect its value. According to this theory, investors can create their own synthetic dividends by selling shares if the company doesn't pay dividends or using dividends received to buy more shares if the company does pay dividends. Its value is mainly in signaling the financial health of the business, like with an increase or a cut. Let's see how TTB's research and innovation can overturn this and be worthy of another Nobel? He is already in contention with his cash being a free call option proposition as opposed to the Black & Scholes Option Pricing theory, another of my professors' Nobel winning contribution to financial research.

For softwares, there is a term for such 'akan datang'thingy - vapor ware, a product, typically computer hardware or software, that is announced to the general public but is late or never actually manufactured nor officially cancelled. The dual listing exercise is a prime example. Announced with all the fanfare, after several years of WIP (work in progress), quietly cancelled with just a footnote in the accounts.

@fairplay check your message box for more details on the court case.

@Just 88 If such a 'magic bullet' dividend policy exists, why wait until now to introduce it? Another "dual listing" kind of thingy to pacify the shareholders, or a copycat of what I have posted here before, dividend plan with auto reinvestment? Pressure must be mounting for management to do something about the discount, instead of blaming it on COL, which resumed buying and the price went up instead of down this time, as previously alleged, haha.

This is COL's investment philosophy-City of London Investment Management (CLIM) is an active value orientated equity manager specializing in Closed-End Funds. It should be emphasized that CLIM’s investment strategy differs from that of a traditional manager, in that we capitalize on the very real and identifiable inefficiencies Closed-End Funds offer. A Closed-End Fund has a fixed capital structure, which is comprised of shares that are listed and traded on a stock exchange via a stock broker. These shares trade at whatever value the stock market puts on them. In effect, a Closed-End Fund trades at a price that reflects demand. Demand, or the lack of it, is reflected in shares trading at a premium or a discount to Net Asset Value (NAV). Our excess return, or alpha, is generated by purchasing Closed-End Funds at a discount to NAV. Further benefits of Closed-End Funds include lower transaction costs and more flexible and faster asset allocation and access to some markets that are effectively closed to direct investment. So the only effective defense against COL is to narrow the price discount, to make it no longer attractive. COL's investment is never the cause of the discount, it is the effect, so why blame it all this while, and at what legal cost?

@stockraider Where did you get the idea that COL's intention is to liquidate iCap? Did they propose such a resolution at any company' AGM? Since they have more than 10% voting control and can call an EGM anytime, have they ever done so? Don't believe the fear mongering and the rumours that driven up the share price recently. COL has just resumed their steady buying which was injuncted by the company until now, so just making up for lost time, I think. All that the company can allege in the court case against COL are just these few points, exceeding the 20% individual shareholding limit, voting against the directors election at the 2021 AGM, and that it may exploit iCap at the expense of other shareowners, resulting in the decimation of iCap. If they have evidence, they would certainly have brought up this intention to liquidate too. All these points were dismissed by the court as without merits. So please get your facts right before spreading fake news.

Instead of spending all that money on Investors Day, I have this very simple reasoning. In TTB's books, there are 3 categories of assets: The existing iCap 'value' portfolio > than the cash holding > than all the other shares out there in the market, in order of preference. If one can use the cash and buy the same existing portfolio at a 40% off cheap sale, why not? If the shares are held as treasury shares, there is no permanent reduction in assets under management and management fees payable.

The poster boy here for not doing SBB is Top Glove, but that is an apple and orange comparison. In iCap's case, it has always been NAV (the basis for management fee), not share price, not e.p.s. For Top Glove, sitting on all that cash pile from the Covid panic, earning a measly say 1.5%, and a projected earnings growth of more than say 25%, the SBB is all about e.p.s. which hopefully will translate into higher share price (the new normal business model). So reducing the share count will translate into higher e.p.s. for the remaining shares and a higher share price, with the controlling shareholders being the major beneficiaries, with their big fat stock options, and being capital gains, all tax free.

What is the point of telling the whole world how cheap your shares are and not explaining to shareholders the options available with a SBB, brushing it off with the standard answer that it reduces the cash available for investment.

Just to clarify, while the total shareholders' equities are reduced in a SBB, the NAV per remaining share goes up if the shares are bought below NAV. Take the simple case of a company with just two shares, market price $2 each, NAV $3.40 each, or total shareholders equities of $6.80. It buys back one share and cancels it. So the remaining one share is now backed by (6.80-2.00) $4.80 of the remaining NAV, a jump from 3.40. If the same share is treated as treasury share and resold at $2.70, the profit of $0.70 goes to shareholders equities, increasing it from 6.80 to 7.50, and the NAV per share is increased from the original 3.40 to 3.75 for the same two shares.

@Patient Investor A company doing SBB has two options with the accounting treatment of the shares. You are assuming the shares are cancelled, which allows the company to book the difference between the purchase price, say $2 before the run up where it has been sitting for quite a while, and the NAV, say around $3.40, the $1.40, as shareholders equities. This is the same kind of profit as sale of shares from the portfolio, a 70% profit. What's not to like? The other less common accounting treatment is to keep them as treasury shares without cancellation. Then it is just like other shares in the portfolio, marked to market or resold back into the market at the then higher market price, in this case, say $2.70, and book the difference 70 sen as profit, and the $2.70 cash is returned back to the kitty. Here, there is no permanent reduction to the cash and it is business as usual. Where is the hibernation?

With the re-emergence of COL as a buyer, there are a few things that is going to cause sleepless nights for some people. The next road bump is the 33% parties in concert rule for the buying, by which time, the gap between the two camps may have narrowed or even reversed, depending on who are the sellers. If they are stale bulls bailing out to take advantage of the higher price after being trapped for so long, the shareholders demographic will shift, and if these are also supporters of management, the switch will have double impact, minus for one and plus for the other. On the brighter side, the narrowing of the discount will reduce pressure from those clamoring for change. Watch out for the buying momentum. If with volume, may indicate new players getting into the game, like the green wave, haha.

@i3lurker I once reported a company paying a director's fees without putting it up for approval at the AGM to the SSM online, was called up by them to provide the necessary evidence, but somehow, NFA. Will p,m. you the details.

The submissions by counsels by both sides in the COL injunction appeal make interesting readings on the background and causes of action by the company. That is why I am not a bit surprised with the verdict.

@i3lurker I am not a lawyer, but one thing I have learned from my expensive lawyer friends is not to go to court with unclean hands. So one should also not talk about good corporate governance likewise.

@i3lurker When I also requested to buy a copy of the company's M&A, they should have realised that I meant business. How many people would want to read the M&A if they just want to buy some shares in the company?

The Registrar knew the legal statues on the matter, as it is their bread and butter business, but they were instructed by the company otherwise, so caught in between until threatened with legal action.

@i3lurker I did present myself at the registrar's office personally and was still turned away, that's why I threatened to report them and they quickly complied. I just want to hear them repeat in person the instruction they received from the company for the record.

I won't be surprised that it would have cost the company at least 3/4 million in legal fees for the futile court case, and this is before possible damages arising from the interim injunction that prevented COL from buying while the prices were still low.

COL has resumed buying, with 215K shares over two days. What is their end game? All the way to the 33% parties in concert limit? Once other vulture funds smell blood in the water and also jump in, it will be game over, as the legal challenge was the last line of defense.

@RealValueInvestor For something as simple as just inspecting a listed company's shareholders' list at its Registrar's office, one can usually just walk in during office hour, maybe after fixing a prior appointment with the person in charge to make sure that the person is available. But with iCap, it took me one whole week. Here is the chronology of events and correspondence:
Day 1 To Registrar: I am a shareholder of the above company through my broker XXX and would like to inspect
the shareholders’ list for my investment research. Can you please let me know when is a
convenient time to do so?
Day 2 To Registrar: Reminder: When can I inspect the shareholders' list? It is a statutory requirement that it is kept
and maintained at your office, available for inspection by members and non-members.
Day 5 From Registrar: Please note that the person in-charge shall revert to you in due course.
From Registrar: We have forwarded your request to the company for consent.
Will let you know the arrangement after they have revert back to us.
To Registrar: This is to confirm our meeting at your office this afternoon, where I repeated my request to
inspect the shareholders list for icapital.biz Bhd (the Company). You told me that you have
been instructed via email by the management of the Company not to accede to my request
without their consent, even though it is within my rights to do so. I am now putting on record
that your continued refusal of my inspection request is in gross violation of Sections 160(2)
and S359 of the Companies Act and Tricor, as agent, is liable to penalty under Section 161 of
the Act.
In view of the above, if I don't get a positive reply from you by 2 p.m. tomorrow, I shall assume
that you intend to continue in willful violation of the Act and I shall then act accordingly.
Day 7 From Registrar: You may come and inspect the Register at our office anytime today.
As you can see, I have to throw the books at them before they relent. So much for good corporate governance!

Is instructing the share registrar not to allow inspection of the share register without prior approval by the company management good corporate governance? Something to hide there?

@thetruthseeker I have already suggested the dividend with reinvestment plan here earlier: Are there other ways to narrow the price discount than the often suggested dividend payout, share buyback and liquidation? Yes, there is one cute little CEF listed in US Liberty All Star Growth fund (symbol ASG). It has managed to trade at a minimal price discount of around 2% with a neat little accounting trick of declaring an annual dividend/distribution of 10% of NAV via 4 equal quarterly payments, but payable only in shares. So nominally, there is a dividend yield of 10% to support the share price, which is higher than most other stocks in the market, but won't affect the AUM at all, i.e. no different than declaring a bonus issue. Because shares have no par requirement and company can return capital to shareholders any time, even though there is no profits for the year, the fund can still make a distribution nominally out of capital. The argument is that while the dividend is not in cash, investors can sell the dividend shares in the market and convert it to cash, and if the share price is close to NAV, the two are fungible, other than the small transaction cost of selling shares instead of banking in cash. So the fund manager is happy because there is no actual cash outflow from the fund and AUM remains unchanged, investors do not suffer steep discount like other funds, and the fund 'earns' a reputation as a solid dividend investment. Like they say, perception is everything, even though nothing has changed.

I took the trouble to obtain copies of the submissions by counsels for both sides to the case to get a better understanding of the dispute. I wonder how many of the company directors have read through them to be better informed on the merits of their case?

Since the legal action against COL is supposedly outside the "investment portfolio management" mandate given to Capital Dynamics, the board of directors will have to take full responsibility for pursuing this futile and expensive legal action. The awards of cost to COL are just nominal, compared to the company's own legal costs all the way from the SC, High Court, COA and now the Federal Court. Because the company's financial year end is in last May, the final costs can be buried until next year's financial accounts, like the previous dual listing expenses. Some people will need to be held accountable for this. Bear in mind that the interim injunction against COL came with the liability for potential damages, which in this case, is the loss of the opportunity of buying more shares while the share price was low. So this may not be the end of the story yet.

If leave to appeal to the Federal Court is not granted, will the company and COL be able to coexist? The company and its biggest shareholders cannot be at logger heads and a solution needs to be found.

Under Section 6.7 of the company's prospectus "“ Managing Discounts
A CEF and/or its shareholders have the power to take action to narrow or eliminate the discount. Some of the options that may be available include share repurchase, open-ending, takeover, liquidation, managed distribution policy and shareholder activism.”
Why is the company so opposed to any of the above as proposed by shareholders?

@blackrock88 I have suggested that this is not a simple arbitrage case between market price and NAV, but a risk arbitrage hoping that there can be a fundamental change to the status quo. Caveat emptor.

Fan clubs are so archaic, why not just a FB, Instagram or Twitter account? These are free, and you can use big data to track your followers and their response? Just look at Elon Musk!

Who is going to fund the club, Capital Dynamics or the company, given that the name is ICap Fan Club, not Capital Dynamics Fan Club? So is this going to be like campaigning before the AGM, with road shows and ceramahs to bolster the support base?

@speakup You can see who has been actively buying up the shares. Putting money where his mouth is. The question is, why not a company share buyback? Keeping them as treasury shares do not deplete the AUM numbers.

@Patient Investor No need to look so far, all the 3 CEF's managed by the major banks in Singapore went for self liquidation some time ago when they can't tackle the persistent price discounts.

@Integrity So is the share a low risk high returns investment as claimed?

Theoretically, if there is no limit to the amount of shares buyback allowed, it is then a riskless arbitrage between cash represented by the shares and cash itself and any price discount can be controlled by the company. This is also how ETF can control the tracking of its share price against the index by creating and buying back its own shares depending on the supply and demand in the market.

Let's look at the following possible scenarios: 1. Since management thinks there are so few worthwhile investments in the market at the moment and bank interest rates have gone up quite a bit. Sell all existing shares in the portfolio and hold nothing but cash, i.e. the NAV of each share is fully backed by cash, what should the share price discount be then? Still at 40%? Don't worry about the cash shell classification, because there is no change in the company's business, as cash is still an investment asset, the company's main business. 2. After being all cash, the company then buys back its own shares in the market if still trading at a discount and carry them as treasury shares, can any investment be better than buying cash at a discount? Theoretically, the company can then run the treasury shares as a buffer stock, buy when discount is wide, and sell back into the market when discount narrows. As long as the buying is at below NAV and selling is above buy back cost price, the company cannot lose money because there is no mark to market risk for cash, and the interest rates on cash deposits are now more than enough to cover management fees and tax.

For those not familiar with the term agency bias, here is a brief explanation courtesy of ChatGPT:
Agency bias refers to a situation where individuals, acting on behalf of others, prioritize their own interests or preferences over the best interests of the principal they are supposed to represent. It commonly arises in principal-agent relationships, where an agent is entrusted with making decisions or taking actions on behalf of a principal.

The concept of agency bias is rooted in the misalignment of interests between the principal and the agent. The principal expects the agent to act in their best interest and fulfill their objectives, but the agent may have their own motivations, incentives, or personal preferences that could conflict with those of the principal.

Here are a few key points to understand about agency bias:

Conflicting Interests: The agent may have interests that diverge from the principal's interests, which can create a bias in decision-making. For example, an agent may prioritize maximizing their own compensation or job security instead of maximizing the principal's profits.

Information Asymmetry: The agent may possess superior information or expertise compared to the principal, which can create an opportunity for the agent to exploit this information advantage for personal gain, leading to biased decision-making.

Moral Hazard: The existence of a principal-agent relationship can introduce moral hazard, where the agent takes on more risks or engages in opportunistic behavior because the consequences may not directly affect them. This can result in biased actions that benefit the agent at the expense of the principal.
Overall, agency bias highlights the challenges associated with delegating decision-making authority to agents and emphasizes the importance of designing effective governance structures and mechanisms to align the interests of principals and agents and minimize biased behavior.

The person who bought the shares 10 years ago would have nothing to show for it share price wise. Cherry picking examples are not going to convince people here. If the company, like the same smart investor, had bought back the company shares two years ago, it too, would have made the same 38.4% more than the MSCI Malaysia Index. On the argument that buying back shares reduce the cash reserve for other buying opportunities, very simple, sell part of the existing portfolio and use the funds to buy back the same portfolio through the company shares at a 40% discount and keep them as treasury shares. So there is no net outflow of cash in the books, but NAV is higher with the captured discount. What's not to like?

@ Nepo and speakup Easier said than done. You don't have the numbers!