Blumont exposes chink in watch-list rules

THE Singapore Exchange's (SGX) watch-list rules assume that a company with multi-year losses and a low share price will struggle to maintain high market capitalisation, but the case of Blumont Group suggests that this assumption may occasionally be wrong.

Blumont is a loss-making mining and investment holding company that has been on a slide since imploding in the 2013 penny stock crash, and it has traded below one Singapore cent since mid-2015. In December 2013, the company took on a US$30 million debt facility from Wintercrest Advisors, a unit of now-bankrupt US hedge fund Platinum Partners. The principal amount was later reduced to US$23.5 million, but the total amount owed by Blumont remained at about US$30 million in 2016.

To repay Wintercrest, cash-strapped Blumont struck a deal that required it to, among other things, issue 23 billion new Blumont shares in November 2016 to Wintercrest at a per-share price of 0.088 Singapore cent, which gave Wintercrest an 83.6 per cent stake in Blumont.