I knew something wasn’t right when Hextar Holdings Bhd announced it was pulling out from the listing yesterday. Heck, why would someone just pull-out from the exercise that could potentially give you instant millions of dollars for your company? Something must be seriously wrong right? Furthermore Hextar told the exchange that it called off the listing to resolve tax matters that would affect its future performance. Noticed the highly sensitive word “tax matters”? What could come to your head when you read such news? Yet another accounting irregularity in the cooking pot of course.

If BusinessTimes exposure is anything to goes by, I’m sure you might wonder the effectiveness in the process of checking and verifying information submitted for the listing by Securities Commission (SC). Do you think SC is sleeping on the job again? I’m not amuze at all that it was an insider who actually blew the whistle into the ears of SC to wake them up. Can you imagine what could happen if the insider didn’t do anything at all and the listing was allowed to proceed and the accounting irregularity was found only after sometime down the road? The minority shareholders will sit along the shoulder of the road crying again.

Gratitude to insider whistle blower

According to the BusinessTimes, an anonymous letter tipped off SC officials who called Hextar officials for a meeting a few weeks ago. The company then scrapped its listing on June 20, a day before the shares were due to be traded. The anonymous showed the sleepy SC officers step by step on how Hextar inflated its revenue, so detailed that it was definitely an insider blowing the whistle. I guess the insider already thought it will takes SC years to investigate how the accounting was inflated again, so might as well tell the SC the A-B-C on how it was done. SC should reward this insider for saving them tons of time to investigate, not that the SC is capable of discovering such a complicated matter.

Offenders let go and SC continues sleeping?

Hextar chairman and managing director Datuk Ong Soon Ho said he is unaware of such a letter “I don’t know. Please call my PR (public relations) company. We’ve settled with the Bursa and SC. I think the issue is already closed”
But the SC has started a probe into the matter and said it would take action if necessary “The SC will review all circumstances surrounding the withdrawal and if any action is warranted, it will be taken”

Are you kidding me? Hextar already has laid the evil intention of cheating public’s money out of the inflated accounting figure, not to mention the company was also involved in the sale of illegal pesticides (according to the letter by insider). And the MD doesn’t blinks when he said the case is already closed? SC has just made matter worse by saying “if any action is warranted” only it will be taken. Goodness, the SC doesn’t think such an act is punishable and not serious enough to warrant the highest attention. Such statement could only encourage others to commit similar act. As long as you’re smart in inflating your figure and no whistle blower, you’re safe on your journey to make millions of public dollars.

Minority shareholders’ gatekeeper is toothless

What could be the impression of foreign investors regarding the listed companies in Malaysia? That most of them already inflated their revenues prior to the listing years ago? That the SC being the highest level gatekeeper is helpless in safeguarding the minority shareholders’ interest? That you need more whistle blowers to wake the authorities up, only to find them jumping onto the bed again? That it’s okay to pull out from the listing if you’re unfortunate enough to be discovered for your ingenious way of inflating the accounting figures?

Hextar would have raised some RM30 million from a public issue under its initial public offer. Major shareholders would have also made RM50 million from an offer for sale. All of the money would be returned to investors within 10 days, Hextar told the Bursa recently. Anyone care to question what will happen if this case was not discovered?

It happened before

In April 2006, Hospitech Resources Bhd called off its listing a day before the shares were due to trade – the funds were then refunded. In November 2006, the SC fined a Hospitech company director RM500,000 for falsifying revenue figures in its prospectus.

Doesn’t Looks Good

No matter which angle you take from such crisis, it doesn’t give a good projection to the business governance in Malaysia. Maybe if the stock market continues to plunge, FinanceTwitter might get the blame for such an article. Doesn’t it puzzle you that such irregularities actually started from even “before” the company gets listed? Get real, would you like to have transparent and efficient authorities in safeguarding your hard-earned money or try your luck investing in stocks which you don’t have any idea whatsoever if the profit-loss figures are reliable? I would prefer qualities than quantities, don’t you?

But then again, the authorities might just release a statement that says “Of well, if it can happen in U.S. it’s OK to have it in Malaysia.” Such is the pathetic mentality of the government as a whole in this country. Can you blame foreign investors for shying away from Kuala Lumpur Stock Exchange?

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June 27th, 2007 by financetwitter

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