Advanced Systems proposes 375-to-1 share consolidation, bonus warrants issue

ADVANCED Systems Automation (ASA), which recently agreed to buy a video-gaming company in a reverse takeover, is looking to consolidate every 375 of its existing ordinary shares into one ordinary share.

The Catalist-listed company also proposed a bonus issue of up to about 19.8 million free warrants, subject to the completion of the share consolidation.

The books closure date will be determined at a later date, the company said in an exchange filing on Thursday evening.

Shareholders who each hold fewer than 375 existing shares as at the books closure date will not be entitled to any consolidated shares, and will no longer be ASA shareholders when the consolidation is completed.

There were 1,901 such shareholders as at April 30, 2021. The company advised them to buy additional existing shares to increase their holdings to multiples of 375, if they wish to remain as shareholders.

ASA's directors believe that consolidating the shares will "generally be beneficial" to the company and shareholders, by reducing the share price volatility and increasing market interest.

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The stock price has been "closing at a low level", hovering between 0.1 Singapore cent and 0.2 cent in the past six months, the directors said in the filing.

Lowly-priced shares are generally more susceptible to speculation and market manipulation, which may lead to excessive volatility and fluctuations in the company's market capitalisation, they added.

Besides, trading in lowly-priced shares may translate to higher transaction costs relative to the trading price, given that it may involve minimum fixed expenses such as brokerage fees, the directors said.

The board also expects the share consolidation to allow the ASA shares to trade at a wider trading band that will enable investors to better price them "in a manner that more accurately reflects the actual financial condition of the company", instead of being at or close to the lowest possible price of 0.1 cent.

"This may increase market interest and activity in the shares, and generally make the shares more attractive to investors, thus providing a more diverse shareholder base," the board said.

Under the proposed bonus warrants issue, each warrant will carry the right to subscribe for one new consolidated share at S$0.25 apiece during the exercise period.

The free warrants will be allotted to ASA shareholders on the basis of one warrant for every three existing consolidated shares held at the books closure date.

Proceeds from the exercise of the warrants may potentially increase the company's capital base, strengthen its balance sheet and provide additional financial flexibility and liquidity, ASA said. Net proceeds are estimated at S$4.9 million, if all the warrants are duly exercised.

Both the proposed share consolidation and warrants issue are subject to shareholders' approval at an extraordinary general meeting, and the Singapore Exchange's listing approval for the consolidated shares and warrants, among other things.

Last week, ASA said it would fully acquire video-gaming firm Excelgames Interactive Asia for S$120 million in new shares and cash. The proposed deal will constitute a reverse takeover of ASA.

ASA's stock closed flat at 0.1 cent on Thursday, on a volume of 28.8 million shares.