List of SGX’s suspended stocks keeps growing; few companies can resolve issues or make exit offers

THE number of stocks listed on the Singapore Exchange (SGX) is falling, but the number of suspended listed stocks is growing steadily. Of the 630 companies listed on the SGX at the end of March, nearly 10 per cent of them – or 61 stocks – are suspended.

Current listing rules say trading suspensions “may persist for a prolonged period”.

In response to queries from The Business Times, an SGX spokesperson said that two outcomes are possible for long-suspended companies: One is a trading resumption, which would be “a positive outcome for shareholders”. The other is a directive to delist.

The SGX spokesperson added: “Conditions may have to be met before share trading can resume. These may include the completion of an investigation or special audit, a judicial management process, or the acquisition of a business that meets SGX’s admission requirements.”

The time taken to resume trading will depend on the complexity and scope of each of the possible actions the company must carry out. The bourse regulator, SGX RegCo, may allow a company’s shares to remain suspended in the meantime.

In the case of a directive to delist, a cash exit offer must be made. However, a company with more liabilities than assets will likely proceed to delist without such an offer, said SGX.

This framework for dealing with companies is markedly different from that adopted in other jurisdictions.

A spokesperson for Bursa Malaysia said that there is no outright provision in the exchange’s listing requirements for the maximum duration of a trading suspension. Nevertheless, the exchange believes that “that it is not in the best interest of the listed issuer and its shareholders to have a prolonged suspension of its securities”.

Trading suspensions in Malaysia related to “inadequate level of operations” or “unsatisfactory financial conditions” are lifted when the company fulfils all the requirements to regularise its condition. If the company fails to do this, the exchange delists the company. 

For suspensions related to a delay in the announcement of financial statements, the trading suspension is lifted when the listed company issues the financial statements within the given timeframe.

If the company fails to do so within six months of the expiry of the timeframe, Bursa Malaysia commences with the delisting procedures against the issuer.

The Malaysian bourse has four companies on its suspension list: special purpose acquisition company Red Sena, which was suspended in 2019; Dolomite Corporation and Top Builder Capital, which were suspended in 2022; and Serba Dinamik Holdings, which was suspended in January this year.

In Hong Kong, a stock suspended for more than 18 months can be delisted by the exchange following a rule change in 2018. A report on suspended stocks is published monthly, with a list of pending remedial actions.

The exchange said in its most recent suspension report: “In the interests of promoting a continuous market for the trading of listed securities, the period of suspension should be kept as short as possible. Resumption of trading normally takes place after the publication of information, and where applicable, fulfilment of conditions imposed by the exchange.”

There were 82 companies in the report for March, which was the latest. Most of these firms were suspended only recently.

Robson Lee, a partner at law firm Kennedy’s, noted that the cure period in London is even shorter. Companies suspended for more than six months may be delisted by the Financial Conduct Authority.

Over in New York, he said that the exchange reviews the “appropriateness” of a company’s listing if it falls below any listing requirement. As the United States has tough requirements, it is not uncommon for a stock to be delisted. Among the requirements are an average closing price of at least US$1 over 30 consecutive trading days, as well as minimum distribution levels for total shareholders and the total number of publicly held shares.

Ideally, SGX would compel controlling shareholders of a long-suspended company to make an offer for all the remaining shares and take the company private.

But not all shareholders would be in the financial position to make a fair and reasonable offer, said Lee.

If the company’s controlling shareholders are not in a financial position to do this, the alternative would be for SGX to direct the issuer to convene an extraordinary general meeting and ask shareholders to vote on a delisting.

But that may not be an option for some companies either.

Said Lee: “If the issuer is hopelessly insolvent and does not even have the financial means to incur the costs of convening an extraordinary general meeting for the delisting… it would be best for SGX to delist the counter.”