Monday, 14 August 2017

Sunday, 13 August 2017

Brdigewater returns faltered

Interesting article about Ray Dalio and Bridgewater, the largest hedge fund in the world, looking forward to his new book "Principles", soon to be published.

One snippet:

The transition comes as returns at the hedge fund’s flagship product have faltered, just like at other so-called macro managers. Since the beginning of 2012, Bridgewater’s Pure Alpha II has posted an annualized return of 2.5 percent, according to a document reviewed by Bloomberg Markets, a far cry from its historic average of 12 percent. It’s down 2.8 percent this year through July. (A smaller Bridgewater hedge fund, Pure Alpha Major Markets, has fared better, as has the company’s long-only product.)

Apparently it has not been easy to make money in the last six years, may be of some comfort for investors who have missed out mostly on the bull run of the US stocks:

Saturday, 12 August 2017

Dual class shares: another really bad idea (3)

Bursa announced the following rather terse media release:

There have been some misleading reports of late which have caused confusion on Bursa Malaysia’s position on the listing of dual class shares. Bursa Malaysia’s position has been misunderstood and taken out of context. We wish to inform that presently, we have no plan to facilitate the listing of dual class shares. In Bursa Malaysia’s pursuit to remain attractive and competitive, we are committed to uphold market integrity and ensure sound investor protection in all our market development initiatives.

One could deduct (although it is not written explicitedly) that facilitating dual shares might help Bursa to remain attractive and competitive, but would weaken market integrity and investor protection.

Wednesday, 9 August 2017

Dual class shares: another really bad idea (2)

I wrote before about this subject.

It seems that Bursa is still considering to allow dual class shares in Malaysia.

Just to show one "horror" case what might happen, Alphaville wrote about the company DryShips (listed as DRYS on the NASDAQ): "Who buys DRYS?".

One snippet:

Taking into account the rapid series of share consolidations Dryships has had down the years, the stock price has fallen from $1.483bn per share to $1.40.

So what’s going on?

We first looked at this thing last month, at which point the peak-to-trough stats stood at an historical high of $206m and a low then of 99 cents. Over the past fortnight, following fresh consolidation of the shares, the price has fallen 80 per cent.

The company has a market cap of $7.26m, but (as of July 21) it held cash of $58.6m and a book value of $652m, against debt of $237m. Its fleet of tankers and drybulk vessels stands at 39.

Confused? Here’s what’s happening.

In April this year DryShips, which is registered in the Marshall Islands, struck a deal with a BVI firm, Kalani Investments, whereby Dryships would sell up to $226m worth of stock to the BVI entity over a two year period.

The deal sees Kalani getting the DryShips stock at a discount and they quickly dump the newly-issued equity on the US market. The flood of stock depresses the share price, which falls below $1 — risking suspension under Nasdaq rules. So, once a month for the past four months, DryShips has enacted share consolidations — most recently at 1-for-7 — to get the price back above a dollar.

It’s these repeated consolidations which throw up the comic historic share price high of $1.483bn when the chart is reset.

The company is controlled by a Greek shipping financier, George Economou, through super-voting stock. Many of the vessels in the DryShips fleet have been acquired from Economou’s private interests — so if you follow the money you’ll see it is flowing from US investors, by way of the Caribbean, to his family estate.

David Webb wrote again about the dual class shares "One Board, One Regulator".

Webb also mentions many other issues that are relevant to Malaysia (and Singapore), for instance:

8. Full disclosure of the identities of subscribers (including beneficial owners of 10% or more of their votes or equity) and the numbers of shares subscribed in placings, whether at initial listing or subsequently. [in the Malaysian context, a six year old blog posting Private Placements: abolish them or limit them, nothing has changed]

9. Full disclosure of the identities of beneficial owners of counterparties to notifiable transactions (acquisitions, disposals or loans) by listed companies. No more hiding behind BVI curtains. [in the Malaysian context just one example: Protasco's Puzzling Purchase, the vendor being owned by Anglo Slavic Petrogas Ltd, a BVI company]

11. INEDs: boards or shareholders can continue to nominate candidates for election as Independent Non-Executive Directors, but controlling shareholders, executive directors and their associates must abstain from voting in the elections, due to their obvious conflict of interests. This will leave independent shareholders to elect the INEDs. Otherwise, INEDs serve at the pleasure of the King, making a joke of their independence.

12. Tighten the permissible general mandate to dilute existing shareholders by issuing new shares for cash, with a maximum of 5% enlargement in any year, at a maximum discount of 5% (currently: 20% at a 20% discount). Any larger size or discount should require a rights issue, or approval by 75% of votes cast by independent shareholders on a special resolution. This would raise HK pre-emption standards to the UK's.

And regarding legislation:

1. provide investors with access to justice in the form of class action rights. The loser-pays costs system will deter vexatious or meritless cases;