Vampire bites Swire
18 May 2003

For the 4th time this season, investors in a Hang Seng Index company have voted against the general mandate, as we show below. The analysis of these figures is made possible by our Project Poll, which ensures that all the votes get counted, 1 share 1 vote, rather than a show of hands where proxies are ignored.

For readers not familiar with it, Project Vampire (Vote Against Mandate for Placings, Issues by Rights Excepted) urges shareholders to vote against the general share issue mandate unless it complies with our recommendations, based on international best practice, which are:

1. The mandate to issue shares for cash, other than by a rights issue, shall be in respect of not more than 5% of the issued shares a the time of the mandate
2. The discount for shares issued other than by a rights issue shall not exceed 5%.
3. The mandate to issue shares for other purposes, including acquisitions, shall be for not more than 20% of the issued shares

As we explained in our voting recommendations, Swire Pacific (SP, 0019/0087) is the only remaining HK-listed company with two classes of voting ordinary shares. This allows privately held John Swire & Sons Ltd to control SP with 52.20% of the voting rights but only 29.0% of the equity. In addition, the annual report shows that directors (including trusts) hold a total of 1.24% of the voting rights.

Together, the insiders account for 2,102,132,972 votes, or 53.44% of the voting rights. Assuming they voted in favour of their board's proposal, and deducting that from the votes "in favour" in the official poll results, then the voting of independent investors (those without board representation) on the issue mandate was as follows:

In other words, public investors voted by a margin of 57:43 against the general mandate. Total votes cast were about 33.69% of the votes held by the free float.

This followed one day after investors at SP's associate Cathay Pacific voted 62:38 against the general mandate. Hopefully Swire will get the message and restrict the SP and CP issue mandates next year.

The evidence is building that the public are opposed to the general mandate. Issuers ignore this at their peril, because it is a logical assumption that if investors say they want something, in this case a restricted general mandate, then they must attach some value to what they want, and will pay correspondingly more for a stock if they get it and less if they don't.

© Webb-site.com, 2003

Organisations in this story

• SWIRE PACIFIC LIMITED

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