Best World sues short-seller Bonitas for defamation; trading halted after shares fall 16%

The defamation suit is in response to a 28-page report published by Bonitas in April questioning the authenticity and legality of the premium skincare firm's profits.
The defamation suit is in response to a 28-page report published by Bonitas in April questioning the authenticity and legality of the premium skincare firm's profits.PHOTO: BEST WORLD INTERNATIONAL

SINGAPORE - Best World shares tumbled after as trading resumeon Thursday (May 9) after a two-week halt was lifted, only to be halted again shortly after 3pm.

The shares last traded at $1.36, down 26 cents or 16 per cent on volume of 28.8 million.

A Singapore Exchange spokesman told The Business Times: "SGX RegCo has suspended trading in the shares of Best World with effect from 3.14 pm today pending our investigations into the accuracy of the company’s May 9, 2019 announcement titled 'Best World International Limited strongly refutes Bonitas research report'. Trading suspension will continue until we have completed our investigations into the veracity of the company’s China sales."   

Earlier on Thursday before the market opened, Best World announced that the company and its founders - Dora Hoan and Doreen Tan - had on May 3 started defamation proceedings against Bonitas Research and its founder in the Singapore High Court.

The move was in response to a 28-page report published by Bonitas in April questioning the authenticity and legality of the premium skincare firm's profits.

In a regulatory filing posted at 1.42am, Best World said the report contains false and defamatory allegations "intended to undermine the reputations" of the group and its senior management, cause a loss of confidence in the group and inflict damage on the price of the company's shares to "financially benefit Bonitas".

It said Bonitas is a professional short seller and has openly stated in the report that it would profit from the decline in the company's share price.

"The company strongly urges its shareholders and potential investors not to be deceived by the report, which has undermined confidence in the group and destroyed the value that the company has created for its shareholders over the years," Best World said.

Bonitas founder and CEO Matthew Wiechert said in a fresh 11-page report on Thursday that the firm has yet to be contacted by anyone from Best World.

When approached, Best World said the litigation lawyers acting for the group, Allen & Gledhill LLP, are in the process of obtaining the requisite court order(s) to serve the court papers on the defendants who are not resident in Singapore.

If mentioned in a defamation claim, Mr Wiechert said the firm is "ready with an exhaustive list of internal discovery document requests" for Best World which it believes would corroborate publicly available findings.

Mr Wiechert said Best World's response fails to address the key issues raised in the Bonitas report.

Best World's filing also included a point-by-point rebuttal of several issues highlighted in the Bonitas report, which Best World says are untrue.

This includes claims that about the scope of its independent review by PricewaterhouseCoopers Consulting (Singapore) and the nature of a portion of its sales for fiscal 2017.

Another claim was that Best World was allegedly conducting direct selling in China, which the company has denied. It has, however, said it would seek a separate legal opinion on whether or not its current distribution model constitutes direct selling under the applicable laws and regulations.

Best World also refuted Bonitas' doubt that Changsha Best, its major customer for fiscal 2017, was not an independent party.

This statement has since been disputed by a separate report published on Thursday by an anonymous group that calls itself Valiant Varriors. The report drew links between the company founder Ms Hoan and Koh Kim Chuan, which the report says is her brother-in-law and legal owner of Changsha Best.

Best World's legal counsel Robson Lee said the Valiant Varriors report is being reviewed and a response will be issued shortly.

Best World, in a separate announcement, requested for its trading halt called on April 24 to be lifted on Thursday morning. The company meant to lift the trading halt on May 6, but had got an extension ahead of its quarterly results release.

Prior to the trading halt on April 24, Best World shares were down 8.99 per cent at $1.62 on volume of 8.7 million shares as at 11.25am, following the Bonitas report.

Days after the report, the Singapore Exchange's (SGX) regulatory arm ordered a review of Best World's China business to address all matters raised by Bonitas. Separately, SGX also granted a two-month extension until June 30, 2019 for the company to convene its annual general meeting.

On Wednesday night, Best World posted a 79 per cent jump in net profit for the first quarter to $10.3 million from $5.8 million a year ago. The company attributed the performance to strong sales growth across most of the group's markets, with outperformance most pronounced in China from strong underlying demand for its DR's Secret skincare line and the full adoption of its new franchise model.