A secret mile-high stake in Pico (0752)
28 February 2013
The folks at US fund manager Denver Investment Advisors LLC (Denver Investments) appear to have been merrily piling into HK-listed shares without a care in the world for our legal disclosure requirements. On 6-Feb-2013, they filed a very late disclosure that they had increased their stake in Pico Far East Holdings Ltd (Pico, 0752) through the 5% disclosure threshold over 13 months earlier, on 16-Dec-2011, at $1.30 per share. Part XV of the Securities and Futures Ordinance requires that disclosures be made within 3 business days of passing through 5% or through any higher 1% boundary above that.
But it was worse than that, because last night another bunch of disclosures was published, filed on 25-Feb-2013, which showed the following increases in their holding after 15-Dec-2011:
| Date | Shares held |
Stake % |
Average paid that day $ |
| 15-Dec-2011 | 61,695,000 | 5.09 | 1.30 |
| 31-Jan-2012 | 73,419,000 | 6.05 | 1.61 |
| 3-Aug-2012 | 87,172,000 | 7.18 | 1.70 |
| 12-Sep-2012 | 97,410,000 | 8.01 | 1.79 |
| 31-Oct-2012 | 109,285,688 | 9.00 | 1.88 |
| 11-Jan-2013 | 122,304,000 | 10.07 | 2.22 |
| 31-Jan-2013 | 137,006,000 | 11.28 | 2.16 |
| 22-Feb-2013 | 146,424,000 | 12.05 | 2.45 |
So they had secretly built up a holding of 11.28% before making any disclosure, depriving the market of that knowledge, then botched that disclosure by only stating a 5.09% interest, when in fact they were already at 11.28%. If you look at box 20 on the first form, you will see the actual shareholding of 137,006,000, but the percentage figure of 5.09% was based on the figure in box 19 from 13 months earlier. All the subsequent forms except the last one have the wrong figure in box 20 too, and all of the forms use the denominator of 1,214,470,104 outstanding shares, but that is incorrect except in the case of the position on 31-Jan-2013. The outstanding shares are regularly disclosed by filings at HKEx, and can also be tracked in the Webb-site database here. In Pico's case, there hasn't been much increase during the period, just a few options exercised.
So Denver Investments has broken HK law. Will they be prosecuted? Almost certainly not, because this once again highlights that foreign shareholders cannot in practice be prosecuted for late disclosure unless they have a presence in Hong Kong, because a summons cannot be served against them outside HK without special permission from the HK courts, which is not lightly granted. See Order 11 of the Rules of the High Court. But Webb-site can name and shame them, and this we now do. A professional fund manager such as Denver Investments should know better and should check and comply with disclosure requirements when investing in overseas markets.
© Webb-site.com, 2013
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