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Better disclosure of pledged shares needed
The spectacular crash in the shares of property firm OKH Global last month raises a pertinent question about disclosure of shares pledged by major shareholders. After the stock's 80 per cent loss on Monday 21 March, the company announced that this was through forced selling of shares pledged by its boss Bon Ween Foong to various foreign banks.
Before the company's statement, brokers had already ploughed through OKH's latest annual report (available on its website) and seen that on page 95, there is a footnote to a shareholding table which states "Mr Bon Ween Foong is deemed to be interested in the 100,000,000 shares pledged to UBS AG Singapore, 45,000,000 shares pledged to Bank Julius Baer and 30,000,000 shares pledged to Credit Agricole (Suisse) SA, which are registered under his name'' and concluded that because volume that day was a stunning 247m shares, this must have come from selling by these three banks. Note that before 21 March it is unlikely that many in the market knew of the pledging, even if it was reported in the annual report.
More importantly, since the pledging of shares clearly turned out to be very material information, I wonder whether there should be a rule requiring share pledges to be more prominently disclosed, instead of deep inside the annual report in a footnote.
I ask this because in the case of other spectacular crashes, the forced selling of pledged shares played a prominent part. For example, the massive losses sustained by Asiasons, Liongold and Blumont all came after such selling, the losses hitting private banks hard. I also believe that other similar crashes apart from OKH's were also the result of forced selling - possibly triggered by SGX's Trade with Caution warnings - which only adds to the need to make sure that whenever shares are pledged in large quantities, there should be prompt and prominent disclosure so investors have a better picture of what could potentially affect their investment. To be honest, I don't know offhand what the rules are that govern such pledges - it could be voluntary - but I think they should be tighter.