Married-Deal – A Defect in Stock Transaction

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Aug 14 2007
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What had happened last Friday was indeed an amazing but the Malaysian authorities should put in a better framework to prevent it from happening again. Everyone was wondering what actually happen when the big block of Transmile Group Berhad (KLSE: TRANMIL, stock-code 7000) shares changed hands at RM12.90 each in an off-market married deal, way above the market price of RM4.50 per share.

The whopping 186 percent premium paid definitely raised investors’ eyebrows. Today The Star reported that the deal was an internal transaction conducted by its major shareholder, POS Malaysia Group. Pos Malaysia & Services Holdings (KLSE: POSHLDG, stock-code 4634) was said to have transfer its shares of Transmile to Pos Malaysia Bhd (PMB) as part of the restructuring of the postal group that involves a capital repayment and transfer of PSH’s listing status to PMB.
Transmile Stock ChartBut the lack of transparency in such a transaction had created confusion, not to mention scores of investors who joined in the rumor of the emerging of a possible shareholder with deep pockets buying into the Transmile. Two very serious defects in the whole equity system should be clarified by authorities:

  • Why was the news of the transaction of RM12.90 per share, a whopping 186% above market price, was released without any clarification as to the details of the deal? Was the news released on purpose to trap and lure investors out there for certain parties to make instant profit? Obviously the one day gap (yesterday, Monday) was sufficient to profit someone after about 8,000,000 shares were transacted at RM5.00 per share after it was bid-up by 56 cents.
  • Why was such a transaction allowed to happen – even though it’s within intra-company? Even though the practice of taking out from the left-pocket only to put it back to right-pocket is normal and widely done in Malaysia corporate market, isn’t this an obvious case of deceiving especially to the accounting book? Somone might argue that its’ only a paper-transaction only but the fact remains that PMB is paying a mountain of money to the tune of RM202.3 million for the 5.8% stake (15.68 million shares) instead of merely RM70.56 million should it be done at market price of RM4.50 per share.

Defect in Married Stock DealThose who chased up the share in order not to miss the boat of the rumor will definitely have a hard cry today – what a way to make losses in 1-day of transaction. FinanceTwitter expect the relevant authorities to come out and explain this irregular transaction while the Minority Shareholders Watchdog Group should demand such an unhealthy practice be stopped by means of better rules and regulations (but will they?).

Such method of married-deal should be transparent, not to mention that it should be stopped at all cost to protect innocent investors. Companies intended to conduct such transaction should be only allowed within a threshold regardless of inter or intra companies. Also such transaction should be accompanied with details explanation for public consumption the same day the news is announced.

Are you one of the innocent investors trapped by this development? Share your thought in the comment section below.

# TIP: Do not chase a stock if the news is too good to be true.

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Very well explained about stock trading transaction. Awesome !

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hello cornel tanady,

thanx for your kind comment … i’ve paid a visit to your blog and left a comment …

you’ve an interesting blog too … hope you’re making money trading options …


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