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Articles: Pre-emption rights/ general mandate

ASMC (3355): shareholders veto general issue mandate
Company announcement, 16-May-2012
This is a Chinese company, so the mandate to dilute shareholders requires a special resolution (2/3 majority) unlike the laxer HK requirement (ordinary resolution, 50%). They only got 59.9%, so the proposal was vetoed. It looks like NXP B.V. (the private equity consortium) was the main vote against. They have 408,806,888 shares at the last disclosure.

Stop the BoCom placing: get a rights issue
We call on SEHK and SSE to stop the big 3 holders from voting to approve each other's subscriptions, which would create a dangerous precedent. Thankfully BoCom has no general mandate, so they also need a special resolution to approve the placing on which they must all abstain. We urge independent shareholders to block it and call for a rights issue instead, and we suggest a way around the primitive NAV rule. (16-Mar-2012)

HKEx preps for placing
Apart from seeking a steep pay hike, the HKEx board is seeking to double its mandate to issue shares for cash without a rights issue, at double the discount of last year's mandate. Couple that with the leaked bid for the London Metal Exchange, and you can see where this is going. We urge shareholders to protect their rights by voting down the general mandate. If HKEx proceeds with LME (and we query why), then a rights issue can fund it. (15-Mar-2012)

Conclusions on ex-entitlement trading and shareholder approval.  Our article of 27-Jan-2011
SEHK, 20-May-2011
Hurray! SEHK has done the right thing and is banning ex-entitlement trading before shareholders have approved the entitlement. See our article of 27-Jan-2011 for more - the rights issue the paper refers to in paragraph 3 is probably Zhongtian. Now, we call on SEHK to address the other problems with rights issues and open offers explained in our article.

HKEx adopts VAMPIRE mandate
Webb-site is pleased to note that HKEx, seeking its first general mandate in 7 years, is now complying with VAMPIRE limits of 5% issued for cash and a maximum 5% discount. Having set an example, SEHK should now amend the Listing Rules and bring the market up to international best practice. HKEx has also unbundled amendments to the Articles of Association, and is not repeating last year's fiasco. (29-Mar-2011)

Ex-chaos trading: Zhongtian proves point
Zhongtian (2379) yesterday demonstrated why we should not trade ex-entitlements before they are approved by shareholders: a 10:1 rights issue at a 97% discount was vetoed. HKEx launched a consultation in December, and we need your support. We also repeat two outstanding problems which HKEx has failed to address, on expropriation of passive shareholders' value, and on the discounts on open offers. (27-Jan-2011)

Dr Wise issues dumb advice on rights issues
SFC, 25-May-2010
He says "but if you decide to let your rights lapse, then you will not need to take any action unless you want to sell your rights in the market." - duh, and why would you give something up rather than sell it for value? Let's change that to "If you decide not to take up your rights, then you should sell them in the market for any value you can get" and we might add "because the company will not do this for you. This is not like the UK, where companies are required to protect inactive shareholders by selling unexercised rights and sending them the proceeds".

HKEx: no reform to placing mandate...or anything else
HKEx's decision to leave the Rules on dilutive issue mandates unchanged is an insult to investor opinion, expressed by their voting on this matter. Since the 2008 blackout saga, the Government and its regulators are unwilling to upset the local business elite with reforms. As China heads for an international currency, the tycoons are not as important to the market's future as HKEx seems to think they are. (27-Oct-2009)

Submission to HKEx on Rights Issues and Open Offers
Thanks to readers who participated in the poll. We have submitted your views to HKEx today. (30-Sep-2009)
HKEx rights issue & open offer proposals
We need your help! HKEx proposes changes to rules on open offers and rights issues. Some of the changes are against investor interests. HKEx also fails to propose a limit on open offer discounts or to bring the treatment of unsubscribed entitlements up to international standards. Give us your opinions! (7-Sep-2009)

Comment: RBI Holdings open offer
Independent shareholders should vote against the open offer at the SGM on Thursday 4-Jun-09, and protect themsleves from 400% dilution. (29-May-2009)

Vampire - Nothing Left to Prove
Last week saw AGMs of CITIC Pacific, Hysan, Li & Fung, China Unicom, Cathay, Swire, HK Electric and CKI. In every case, a majority of investor votes were against the 20% cash issue mandate, but controllers pushed it through. With 10 HSI companies now having voted, Project Vampire has nothing left to prove - investors have voted on average by more than 2 to 1 against the issue mandate. It's time for the regulators to act. (16-May-2004)

Almost No Mandate
The tide is turning in Hong Kong's battle for pre-emptive rights. In a close shareholder vote, the board of HKEx almost lost its general mandate to issue new shares, by asking for a 20% cash mandate, against the recommendations of Project Vampire. And this is the company whose subsidiary makes the Listing Rules which allow such mandates in the first place. Things weren't much better over at Bank of East Asia, either. (5-Apr-2004)

Four more slay Vampire
Another four companies have joined the elite "Vampire Pioneers" list of companies which have adopted the recommendations of Project Vampire to limit their general issue mandates, so reducing the risk to investors of unwanted dilution of their shareholdings and economic rights. Find out who these pioneers are, and how your company can join the list. (10-Jul-2003)

Arts Optical adopts Vampire
A month ago we launched Project Vampire, urging investors to vote against the general issue mandate which allows directors to dilute shareholders' interests without a rights issue. We promised a fanfare for the first HK company to comply with our recommendations on restricting the mandate to international standards. And the prize goes to: Arts Optical. We hope that others will follow their example. (22-Apr-2003)

Webb-site.com launches Project Vampire
Webb-site.com announces the launch of Project Vampire and urges institutional investors worldwide to vote against the placing mandate at each AGM, as this is a license to dilute shareholder value and voting rights. We recommend standards set by UK institutional forums, as we explain. (16-Mar-2003)
Listing Rules Review Part 1: Stop Displacement
The SEHK has published a long-awaited consultation paper on amendments to the corporate governance aspects of its Listing Rules. It's 175 pages long, so we'll being covering this in a series of articles before making our concluding submission. We start with the general placing mandate for non-pre-emptive issues, where the Exchange proposes cosmetic changes which fail to bring Hong Kong up to international best practice. (23-Jan-2002)
Toxic Offer
Great Wall Cybertech has kicked off the bad governance year with a proposed toxic "open offer" of 4 new shares for every existing share held, at an 85% discount to market. Either you take it up or get massively diluted. In response to this, the share price crashed 41% today. We first criticised this style of offering in 1999 and the Stock Exchange has yet to close the loophole. We tell independent shareholders how to STOP this deal. (2-Jan-2002)

Open Rip-offers
Eel-feed maker Corasia Group has announced an open offer of 1 new share for every share held, at a 76% discount to the previous price. We explain why deep-discount open offers should be banned because they force shareholders to either pay up or lose value. Unlike rights issues, you cannot just sell your entitlements to recover the bonus issue which is hidden in the offer. Meanwhile, independent shareholders of Corasia should vote against the offer. (11-Oct-1999)

The Placing Game
Leading fund manager Templeton has announced that it will vote against all resolutions which give HK-listed companies discretion to issue new shares without first offering them to existing shareholders. Webb-site.com explains the arguments and tells you why we support this move. (17-May-1999)

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