SGX rejects firm's share consolidation application

Exchange feared move by China Taisan would raise risk of stock manipulation

Knitted fabric maker China Taisan Technology Group Holdings has had its application for a second share consolidation rejected.

The S-chip said the Singapore Exchange (SGX) turned down the application because it feared there would be so few shares left after consolidation that it raised the risk of the stock being "cornered". Cornering refers to stock manipulation.

After the first consolidation failed, China Taisan wanted to try again to meet the minimum trading price (MTP) rule that was introduced in March. The rule dictates that the six-month average share price of mainboard-listed companies must be 20 cents or more after the grace period ends on March 1 next year. Failure to meet this rule, which is aimed at improving the stock market and reducing excessive speculation, will see the firm go on a watchlist for three years.

Some industry watchers noted yesterday that it is ironic that in China Taisan's case, further share consolidation is seen possibly leading to the unintended risk of the stock being cornered or manipulated.

The S-chip's stock price has remained below the 20-cent MTP threshold since Aug 17, three months after it did its first consolidation. China Taisan stock last traded at 10.5 cents on Nov 25, with 30,100 shares changing hands.

The S-chip's stock price has remained below the 20-cent MTP threshold since Aug 17, three months after it did its first consolidation. China Taisan stock last traded at 10.5 cents on Nov 25, with 30,100 shares changing hands.

It applied for a second consolidation on Nov 13 but was rejected on Tuesday.

The SGX recently advised firms that cannot meet the MTP through consolidation to take other steps. For some, a transfer to Catalist may be more suitable, it said.

National University of Singapore Business School associate professor Mak Yuen Teen said this is not so easy.

In a letter to The Business Times yesterday, he noted that many companies that fail to meet the MTP requirement "suffer from poor business fundamentals that threaten their long-term viability".

"The risk of problematic companies transferring to Catalist is that rather than being a platform for companies with growth potential, Catalist also becomes a graveyard for dying companies. Over time, this may affect confidence in Catalist companies and the attractiveness of the second board as a listing platform for growth companies," he said.

Last month, the SGX warned investors about financial irregularities emerging in local listed companies with operations in China.

Several of these companies have recently announced significant and perplexing changes in their financial positions, SGX chief regulatory officer Tan Boon Gin said last month. He did not name these companies.

A version of this article appeared in the print edition of The Straits Times on December 03, 2015, with the headline 'SGX rejects firm's share consolidation application'. Print Edition | Subscribe