Articles: Pre-emption rights/ general mandate

Independent shareholders veto Tongda Hong Tai (2363) Whitewash Waiver
The largest shareholder wanted to underwrite a 1:1 open offer of new shares, potentially obtaining majority control without making a General Offer. Howel Thomas and his Wykeham Capital Asia Value Fund made sure that didn't happen, using the 75% approval requirement introduced in 2018. (16-Nov-2020)
Shareholders veto General Issue Mandate at Techtronic (0669)
Company announcement, 18-May-2018
In a rare victory, outside shareholders overcome management's support for their own mandate. Although the basic issue mandate was restricted to 5% for cash placings at a 5% discount, the opposition was likely due to the seeking of an extension of the mandate to cover repurchased shares, giving management the ability to allot up to 15% in total. Outsiders also almost unseated INED Christopher Langley, who was re-elected by 53%:47%. He's been an INED for 17 years and clearly doesn't have a mandate from independent shareholders.
Capital VC (2324) terminates placing
Company announcement, 27-Apr-2018
This follows a complaint by Webb-site to the SFC on 2-Feb-2018 regarding the 84.9% discount of the placing price to net asset value per share of this closed-end investment company, and 3 subsequent extensions of the completion date. The termination announcement fails to state what "conditions precedent" have not been fulfilled, but the only disclosed condition in the placing announcement was listing approval for the new shares.
Capital VC (2324) dilutes holders againOptions announcement
Company announcement, 2-Feb-2018
The "Enigma Network" investment company is blowing the general mandate, issuing 19.96% new shares at $0.05, not mentioning the 84.9% discount to Net Asset Value of $0.3308 at 31-Dec-2017. The board claims the issue is "in the interests of the Company and the Shareholders as a whole". The placing agent, Infast Brokerage, is 95% owned by GCPS (8193), another Enigma member. 3 minutes eariler, Capital VC announced a grant of 275m options at $0.058 to unnamed persons. That's another potential 10% enlargement of the share base at an 82.5% discount to NAV. We call on the SFC to direct the Stock Exchange to reject the listing application for all the new shares.
Submission on Capital Raisings by Listed Issuers
Webb-site responds to HKEX's consultation which, while positive, ignores several key issues and does not go far enough in others. Have your say! (24-Nov-2017)
SFC seeks court orders against ex-chairman of Kong Sun (0295) and China Sandi (0910)
SFC, 13-Feb-2017
For allegedly using a nominee to take discounted shares in placings.
Yingde Gases (2168) and its "disgruntled directors"
Company announcement, 14-Dec-2016
War has apparently broken out over an alleged abuse of the general issue mandate which would shift the balance of power - a classic example of why boards should not be able to pick and choose their shareholders in this way.
L&A (8195) launches placing via FP Sino-Rich
Company announcement, 21-Jul-2016
After the bursting of a bubble in its share price, L&A exhausts a general issue mandate, to raise money so that it can lend it out.
StanChart (2888): holders of unsubscribed rights to receive payment
Company announcement, 11-Dec-2015
The shares were placed out at 505p, a premium to the 465p rights issue price, so those in HK who did not take up their rights will get 40p for each rights share, minus expenses, converted to HKD. Unlike HK, the UK Listing Rules require issuers to protect inactive shareholders by doing this. For all other HK rights issues, this never happens, thereby stealing from sleeping holders. When will HK upgrade shareholder protection?
Bubbles and troubles in Hong Kong
Pour yourself a coffee and digest this long article as we investigate several ongoing abusive "open offers" and placings as well as show you who's been making out in multi-billion-dollar bubbles. We call on regulators and rule-makers to take action. (24-Sep-2015)
Time2U (1327) blows general mandate in 20% placing 6 months after IPOSettlements
Company announcement, 5-Aug-2015
The placing via Black Marble Securities is at $0.40, compared with the IPO price of $1.10 and post-IPO NAV of $0.77. The company had no need for cash as it had substantial net cash after the IPO. Update: from settlements on 11-Aug you can see that part of the stock likely went to clients of Emperor Securities, Win Fung Securities and Gransing Securities.
1010 Printing (1127) AGM resultsAGM notice
Company announcement, 28-Apr-2015
Webb-site is pleased to note that 1010 Printing has cut its general mandate for cash placings to 5% new shares with a maximum discount of 5%, retaining power to issue 20% for acquisitions. This is in line with the 2003 Project Vampire recommendations, and protects investors from dilution. Webb-site founder David Webb holds over 7% of the company.
Petition filed with SEHK and Listing Committee
We close and submit the petition on 1-share-1-vote, and call on the Listing Committee to get back to improving the quality of HK's market rather than trying to degrade it, starting with 4 key issues. (2-Jan-2015)
Report on non-preemptive share issues in Asia
CFA Institute, 3-Mar-2014
HK comes off looking bad in comparison with UK, Singapore, Malaysia and Thailand, which all have either lower discount limits, lower quantity limits, or higher approval thresholds.
Midland (1200): shareholders veto 10% general issue mandate and share option scheme
Company announcement, 25-May-2012
Giordano (0709) shareholders veto 10% general issue mandate
Company announcement, 22-May-2012
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 approvalOur 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.
Midland Holdings (1200) shareholders veto general mandate
Company announcement, 17-May-2011
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".
Asia Resources (0899): revised results of open offer
Company announcement, 28-Apr-2010
Having realised that the underwriter is not entitled to any shares, Asia Resources revises the allocation to fully satisfy the 425 registered shareholders who applied for up to 2.5m shares each, who get an average allocation of 169,111 shares. Almost all of them held 1 board lot (10,000 shares) or less. Investors holding about 1680.38m shares via CCASS fare worst in this, being scaled back to 1.178% of their applications.
Asia Resources (0899): results of open offer
Company announcement, 20-Apr-2010
Despite the excess applications covering the unsubscribed entitlements several times over, the Company tries to give about 20% of them to the underwriter, claiming that the excess applications were abused. A remarkable 212 applicants held 1 board lot (10,000 shares) and 273 held less than that.
Presentation by David Webb at a conference on Shareholder Rights
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)
China Zenith Chemical shareholders veto general issue mandate
Company announcement, 6-Dec-2007
China Zenith Chemical shareholders veto general issue mandate and option scheme refresh
Company announcement, 7-Dec-2006
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)
Webb profiled and interviewed on "New Territory", 2003
RTHK, 5-Jun-2003
We are not sure when this progamme was broadcast, but the interview was conducted on 5-Jun-2003 with Paul Gordon. It covers the "Project Poll" campaign for 1-share-1-vote in shareholder meetings, which we eventually won in 2006, abolishing the "show of hands" system, as well as "Project Vampire", the push for pre-emptive rights, still in progress as of 2020.
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) launches Project Vampire 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)
The Dilution Solution
In the ongoing Pacific Challenge story, the board has made its next move after their cash acquisition of was blocked by independent shareholders. Now they are trying to issue shares to "independent third parties" to raise cash for which there is no present need. Kistefos, a Norwegian 26% independent shareholder, spoke exclusively to (1-Aug-2000)
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. explains the arguments and tells you why we support this move. (17-May-1999)

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