An awful lot of hogwash (we are using a family-friendly word) is produced in this town when companies announce “bonus issues” of shares, and the Stock Exchange and SFC continue to allow them to get away with making false and misleading statements in their “reasons for the bonus issue”. Indeed the very name is misleading – there is no “bonus” in issuing shares for free, because the increase in the number of shares is offset by a decrease in value per share.
Today’s glowing example comes from Forefront Group Ltd (Forefront, 0885). After a magical rise in its share price of 359% so far this year, it proposes, in its circular dated 12-Jun-2015, a bonus issue of 9 new shares for every share held. Economically this is the same thing as splitting each share into 10 shares. It makes no difference to the net assets of the company or the value of shares held by each shareholder, other than subtracting the costs spent on the exercise including producing the announcement and circular, sending out new share certificates and holding a general meeting.
Let’s analyse the false and misleading statements in the “reasons” section on page 9: Continue reading →
The Securities and Exchange Board of India (Sebi) has unearthed a huge network of entities, which systematically rigged the initial public offerings (IPO) on the small and medium enterprises (SME) exchange platform. Their operations were so well-planned and coordinated that these carried on for more than a year beginning with preferential allotment several months before the IPO, continuing long after the listing.
Sebi’s investigation has revealed that the scamsters floated these firms, allotted fresh shares to themselves, distributed these to some front entities, sold these on IPO, funded the people who bought these on IPO , appropriated the IPO proceeds, and then funded the group of traders who were then hiking up the prices endlessly. All to convert unaccounted money into legitimate money that can be attributed a source: the stock exchange. Continue reading →
Ketan Parekh scam: ICAI blames litigations for delay in action
30 June 2015
Press Trust of India
New Delhi, Jun 30 (PTI) With over a decade having passed since auditors’ role came into question in the Ketan Parekh stock market scam, auditing regulator ICAI has blamed “litigations and frequent adjournments” for delay in its action against the concerned member auditors. Continue reading →
Even Fraud-Savvy Investors Often Look for the Wrong Red Flags
29 June 2015
New research identifies the types of investors who are vigilant about corporate fraud, but finds that most of those investors are tracking the wrong red flags – meaning the warning signs they look for are clear only after it’s too late to protect their investment. The work was performed by researchers at North Carolina State University, George Mason University, the University of Virginia and the University of Cincinnati.
“Individual investors get hurt if they own stock in fraudulent companies that cook the books, such as Enron,” says Dr. Joe Brazel, a professor of accounting at NC State and lead author of a paper on the work. “But we wanted to know how investors think about fraud and whether they try to protect themselves.” Continue reading →
Exit Barriers for U.S.-Listed Chinese Stocks: Chinese companies, some of which stung by accounting scandals on U.S. stock markets, are now struggling to privatize, delist and move on
By staff reporters Huo Kan in New York and Zhang Tao in WashingtonJinan-based software developer Pansoft Co. Ltd. says it’s going private, climbing aboard an increasingly crowded life raft as Chinese companies abandon U.S. stock investors. As of mid-January, some 20 of the 230 Chinese companies with stock traded on the New York or Nasdaq exchanges had announced privatization plans. At least eight in the group had completed the process. The privatization push, expected to accelerate in 2012, stands in stark contrast to the scene in early 2011 when Chinese companies were frantically competing to list on U.S. stock markets. That was before accounting scandals and short-sellers hammered a few high-profile companies, damaging the image of Chinese concept stocks overall. Continue reading →
Reasons, Impacts, and Implications of the Delisting Wave of Mainland Chinese Enterprises Listed in U.S. Stock Markets
Since 2011, a series of Mainland Chinese enterprises listed in U.S. exchanges have been suspended, delisted, privatized, or reverted to over-the-counter transactions. This phenomenon attracted wide-spread media attention, and the companies involved include Xinhua Sports and Entertainment, Shanda Interactive Entertainment, FunTalk, Jiangbo Medicine Group, China Security Surveillance Technology, and Shandong Yuhe Group. This paper analyzes the reasons and impacts of the delisting wave as well as its implications on Hong Kong’s IPO capacities and the consolidation of the city’s status as an international financial center.
The variety of factors that triggered the delisting wave
Since mainland enterprises started going public in overseas markets in early 1990’s, the U.S. has been a main destination. There have been four episodes of IPO booms in America (see Table 1), with Internet companies such as Renren, NetQin, Jiayuan.com, and Qihu 360 Technology going public in the first half of 2011. The turning point was the second half of last year, when an increasing number of Chinese companies were delisted or privatized due to fraud litigations and short-selling pressure from institutional investors. Continue reading →
Toshiba accounting errors may be over $1 billion – report
Toshiba Corp may need to mark down past earnings by over 150 billion yen ($1.22 billion or 0.78 billion pounds), nearly triple an earlier estimate, after an ongoing investigation into past accounting practices found more irregularities, a report said on Saturday. Continue reading →