The Hong Kong Securities and Futures Commission warned investors to take “extreme caution” when trading shares in Imperial Pacific International Holdings Ltd.
It is the second time in more than a year that the SFC has warned investors of concentrating ownership of the same listed company.
The company, which invests in revenue streams from Macau junket integrator Hung Sheng Group, said in a filing that on July 15, its affiliate Best Sunshine International acquired an exclusive license to develop and operate a casino resort on the Pacific Island of Saipan.
SFC said on Friday that a “recent survey” of Imperial Pacific’s ownership structure showed that as of July 15, only 19 shareholders owned 92.61% of the issued shares, showing a high “share concentration in minority shareholders.”
The SFC said, “Considering the high concentration of minority shareholders’ shares, shareholders and prospective investors should be aware that even if a small number of shares are traded, the price of the company’s shares may fluctuate significantly, and extreme caution should be taken when trading shares.”
In October last year, the commission said that the company, then known as First Natural Foods Holdings Inc., shares at least one common shareholder, or coylyze, over the two survey periods, had only 14 shareholders with 94.22% of the stock.
The assets that provide a source of revenue for Macau junkets were already married in March this year to First Natural, a publicly traded company. Such an exercise in assets related to an already listed company – and who exactly owns such companies at the time of the exercise – is a question that is not subject to the same level of scrutiny as a similar event involving a company applying for a new listing in Hong Kong.
Hong Kong’s rules for newly listed companies state that, in principle, “no more than 50% of the securities that were publicly held at the time of listing can be profitably owned by the three largest publicly traded shareholders.”
In the wake of numerous financial scandals by mainland China and Hong Kong-listed companies in April 2013, a discussion paper released by Hong Kong Exchange Liquidation Limited said the risk of a major corporate governance structure with high ownership concentration on the theoretical front was “the acceptability of minority shareholders by controlling shareholders.”
The paper added that 75% of Hong Kong listings have controlling shareholders who own “more than 30%” stake in the issuer. HKE said it was the highest percentage of major stock markets studied by CFA Labs, a global body with a mission to improve ethical standards for investment.
In early September last year, First Natural reported an unusual increase in the price and volume of its shares, which the directors at the time filed a report saying they had no idea why. T
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