ECM-Libra: Brouhaha about Highs & Lows
On December 27 last year, the three founding members of ECM Libra (9784) -- Lim Kian Onn, Kalimullah Masheerul Hassan and David Chua -- announced that they were each selling 1% of their shareholding in the company to Khairy Jamaluddin. The deal was transacted at 71 sen per share, or a total of RM9.2 million.
ECM-Libra shares shot up to an all-time intra-day high of RM1.12 on January 11, 2006 -- over 50% premium of Khairy's purchase price within two weeks. (Source: StarBiz.)
SOURCE: StarBiz
Though such phenomenon is not abnormal in market movements, the circumstances surrounding this acute spike in ECM-Libra counter, post-Khairy's buy-low purchase, has remained interesting till this day.
Negotiations on the 'merger' between ECM-Libra (9784) and Avenue Capital Resources (2143) began in January 2006, soon after Khairy's buying into the former. The 'merger' was wrapped up on June 28, when ECM-Libra became a shell company and the new 'merged' entity, ECM-Libra Avenue Sdn Bhd, assumed former Avenue's listing status on Bursa Malaysia.
Subsequently, Aseambankers Malaysia also announced on behalf of ECM Libra that the Distribution and Capital Reconstruction exercise has been completed on August 8, 2006.
It informed Bursa Malaysia stating that its 'merger' with Avenue Capital Resources Berhad into a new entity named ECM Libra Avenue Berhad (2143) has been wholly satisfied by the issuance of 442,000,000 new ordinary shares in the new entity, and credited as fully paid-up.
On the part of ECM-Libra (9784), it also made a voluntary disclosure about ( 1 ) the distribution of 433,000,000 ECM shares (2143) received by ECM Libra pursuant to the 'merger' to shareholders of ECM Libra on the basis of 1 ECM share for 1 ECM Libra share held; and ( 2 ) the capital reconstruction exercise involving a reduction in the par value of the share capital of ECM Libra.
It was revealed that the share premium account was utilised to set-off accumulated losses pursuant to the 'merger', and thereafter, the ECM-Libra (9784) shares were consolidated to a par value of RM0.10 per share.
This is how the new 'merged' entity, ECM-Libra Avenue, of which the Ministry of Finance has a substantial stake of 128,019,819 shares (15.41%) via Aroma Teraju Sdn Bhd, had performed in the last three months:
SOURCE: StarBiz
To see how much shareholding Kalimullah Masheerul Hassan and Khairy Jamaluddin -- the lightning rods to the ECM-Libra/Avenue controversy, read this blog entry.
You will, however, also find little voluntary disclosure about Khairy's share disposal on the public domain, especially on Bursa Malaysia official website, at this point in time.
Watch this space.
Comments
"Though such phenomenon is not abnormal in market movements, the circumstances surrounding this acute spike in ECM-Libra counter, post-Khairy's buy-low purchase, has remained interesting till this day."
An interesting movement indeed but from behavioural finance point of view, the spike could be a sentiment offshoot as a result of observing a "princely" participation by the market. Taking two weeks for a spike is considered a rather quick reaction, or in this case a one day spike, an overreaction followed by mean reversion over time.
I do not know much about Malaysia's regulation of insiders' and major shareholders' actions but based on casual observation , behavioural finance could be at work at that point of time. Another interesting factor to note is that, perhaps, the Malaysian market has a very powerful "political sentiment factor" widely watched by the market.
Posted by: Benkaiser![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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August 13, 2006 08:44 PM
The share price surged by 10% the day after KJ acquired his 3%, a reaction befitting Malaysian investors’ penchant for what Benkaiser aptly calls the "political sentiment factor". The surge continued in early January '06 and the company was even asked by Bursa Malaysia to comment of the Jan 4 NST Business Times headline "ECM LIBRA SURGES ON INVESTMENT BANK STATUS TALK". This run-up culminated in the intra-day high of RM1.12 on January 11. Then on Jan 19 the merger with Avenue was announced and the public was duly informed that the amount of "Consideration Shares" (ultimately settled at 442 million shares in ECM Libra Avenue Berhad in February) took into account, inter-alia, “the total market capitalization of ECM Libra of RM459.0 million, based on the closing price of the shares of RM1.06 as at 17 January 2006.”
Thus the higher the price on the last market day before the announcement, the higher will be the number of consideration shares and the easier it shall be to obtain shareholders' approval for the merger. Thus all ECM Libra shareholders should be thankful for the run-up in the share price or the 1 for 1 share swap may not have been possible.
Was the timing of the run-up and the merger deal purely coincidental? Please, I'm not accusing anyone of manipulating the market (ahem!).
JEFF OOI says: Thanks. You have left us a strong context to the issue. And defining context to issues and events is what I am after.
Posted by: birdseye![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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August 14, 2006 08:19 AM
How can it be possible that KJ only lost RM$200K in the stock sale?
He lost 8.5 % for selling it at RM$0.65...which means he should have lost around RM$780K
Any thoughts anyone?
Posted by: jigsawpuzzle![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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August 14, 2006 01:00 PM
I saw this at thestar online. Famous words of KJ.
"“Frankly, I received no less than three offers to buy over my shares. One is from a government-owned company, another from an international company while a Chinese businessman offered a very profitable sum.
“I rejected the first offer as people will claimed that it was a government bailout to rescue me while the subsequent offers will see the shares falling into the hands of outsiders and non-bumiputras.
“I will not let that happen and will rather suffer losses as long as the shares remain in the hands of our people.” "
Does this mean the Chinese and Indians are not "OUR PEOPLE" and they are not qualified to buy this God Send SIL's shares?
My translation of his words: "I rather loose both my eyes if I can stop non-bumpitras from succeeding." Correct me if I'm wrong
Imagine if he becomes the next PM.....
Posted by: mystory![[TypeKey Profile Page]](http://www.jeffooi.com/nav-commenters.gif)
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August 14, 2006 02:47 PM