Bloomberg published a news report today (“I Was Cheated” – Tales From the Collapse of a Commodity Giant, 26 Aug) highlighting a 71-year-old Francis Tay, ex-civil servant, condemning the Singapore authorities over the crash of share prices of Noble Group Ltd.
Mr Tay said he feels “cheated”. He has lost almost S$50,000 of his retirement savings in the implosion of Noble Group, a commodity trading giant listed on SGX. He also said shareholders like him have been let down by regulators whose job it is to protect them from the sort of crisis that has brought the company to the brink.
“I was cheated of my hard-earned savings,” said Mr Tay. “How can a giant company collapse?” he said in an interview earlier this month. “What message does that send to the world about Singapore’s reputation?” he asked.
Mr Tay and other retail investors have been among the hardest hit. The company has lost billions in value since 2015 as the once $12-billion company ran up untenable debt and losses. It has been accused of deceiving investors with accounting tricks.
Allegations of irregularities were first brought up by Iceberg Research, which said that Noble’s profits were inflated. The group has rejected the claims.
Angry with Singapore authorities
Many of the investors are angry with Singapore Exchange and MAS, which are responsible for regulating public listed companies.
“The SGX is a policeman without a gun,” said Mr Tay. “Layman investors like us only have access to on-the-surface information, such as company releases or news reports.”
Another elderly person, 61-yer-old Lisa Ng, said that she lost about 90 percent of her investment in Noble. “I do wish that I had gotten out when Iceberg had come out with its critique of Noble’s accounting,” she said. “I thought that Noble, being a blue-chip share, wouldn’t be like what they claimed.”
“Questions ought to be asked about whether the SGX board has adequately prioritized investor protection,” commented Prof Mak Yuen Teen at NUS School of Business.
SGX and MAS defend themselves
The SGX defended itself by setting out a summary of what it did over the last 3 years regarding its dealings with Noble. SGX said it frequently contacted with the company and queried for more details.
SGX said, “We required the issuer to appoint a Singapore auditor to do an independent review, and took a series of actions to ensure the issuer’s auditor addressed the issues of concern in every single year-end audit since FY2015.”
“Notwithstanding that both the audits and review were clean, we continue to do our part to investigate matters that are within our remit. We are committed to holding issuers and professionals responsible for their actions and opinions. If there is any evidence of wrongdoing, we will refer it to the appropriate authorities,” it added.
And MAS responded, “MAS will thoroughly investigate potential breaches of the law that have been referred to us by SGX, should SGX’s investigations uncover breaches of the law.”
“MAS will not hesitate to take appropriate enforcement action if our own investigations uncover any violations of our regulations,” it added.
At the coming general meeting, the shareholders will be asked to vote for a debt-for-equity restructuring in order to save the company. The company said it is a do-or-die deal, which will see 70% of equity owned by creditors and 10% by management. The equity of the rest of the shareholders will now be reduced to just 20%. However, it is by no means out of the wood even with this deal as only about half of the debt is written off by the creditors. The company said that if the shareholders do not vote for this debt-for-equity restructuring, the company may be forced to file for bankruptcy.
This is the second time a major trading company on SGX has run into trouble. Olam International, one of the world’s largest food commodities traders, came under attack from Muddy Waters LLC in 2012. The short-seller raised doubts about its finances and said Olam ran a high-risk of failure. Olam dismissed the claims but after a rout in its shares, Temasek Holdings, originally only a minority shareholder of Olam, went on to take a controlling stake in May 2014.