The Time dotCom IPO was an utter flop, with applications for only 142.86 million shares, or 25% of the total 571.7 million shares made available for public subscription. Excluding shares that were privately placed or subject of restricted offer for sale, individual investors applied for only 29.738 million shares or a mere pittance of 5.2% of the total number of shares offered in the IPO.
The use of public funds to bail out the Time dotCom 75% IPO shortfall paying the IPO price of RM3.30 when the market had been quite unanimous in expecting a sharp plunge of its price on its public listing tantamounts to criminal negligence, criminal breach of trust and criminal misapplication of public funds.
Time dotCom closed at RM2.08 per share when trading closed yesterday, which is RM1.22 or 36.96 per cent below its IPO price of RM3.30.
The colossal losses suffered by three known government-linked funds
and agencies, namely the Employees Provident Fund (EPF), the Pensions Trust
Fund (KWAP) and Danaharta which have publicly admitted to investing in
Time dotCom at RM3.30 per share, whether subscribed or unsubscribed portion
of IPO, are as follows:
No. of Shares Cost Present value Loss incurred
EPF 81.6 m (3.22%) RM269.28m RM169.73m RM 99.55m
KWAP 273.86 m (10.82%) RM903.74m RM569.63m RM334.11m
Danaharta 80.05 m (3.16%) RM264.16m RM166.50m RM 97.66m
435.51 m RM1437.18m RM905.86m RM531.32m
The three government-linked funds and agencies of EPF, KWAP and Danaharta have collectively lost the mind-boggling sums of RM531.32 million in the past three months since Time dotCom's public debut - a most unforgivable and unpardonable mismanagement of public funds in taking part in the bailout of Time dotCom IPO for the benefit of Time Engineering, Renong and Tan Sri Halim Saad.
Although the EPF, KWAP and Danaharta took up a walloping 76.14% of the entire Time dotCom offer of 572 million shares at RM3.30 per share, or RM1.44 billion out of the total IPO offer of RM1.88 billion, I believe that if all the identities of the takers of the balance of the IPO are known, they will mostly be other government-linked funds and agencies which can total as high as 90 to 95 per cent of the entire Time dotCom IPO.
If government-linked funds and agencies constitute the lower estimate of 90 per cent of the entire Time dotCom IPO offer, it would mean an investment of RM1.69 billion, or a loss of RM624.62 million at the end of trading yesterday - all to ensure the success of the restructuring exercise of the Time Engineering and Renong.
At the end of the Time dotCom IPO, despite its making double history as the country's biggest offering as well as the biggest flop when it was undersubscribed by 75 per cent, Halim Saad was laughing all the way to the bank as he had ended up RM900 million cash-rich at the expense of government-linked funds and agencies like EPF, KWAP and Danaharta.
Many questions still cry out for answer in the Time dotCom IPO bailout fiasco, especially over KWAP’s involvement and the government’s handling of the scandal after it became public.
Firstly, when private and corporate investors fight shy of the Time dotCom IPO, as evidenced by the high rejection rate of 80% of the restricted offer for sale and 75% of the entire IPO offer, why did the KWAP and EPF acted like "fools who rushed in where angels fear to tread"?
Did the KWAP and EPF Investment Panels acted judiciously and independently when they decided to commit RM903.74 million KWAP funds and RM269.28 million EPF funds respectively in Time dotCom IPO shares based on the cirteria of security, liquidity and yield - when every prudent investor was keeipng a ten-feet barge-pole distance?
It is clear that the KWAP and EPF Investment Panels and their advisers were unable to exercise independent and impartial judgement with regard to the use of KWAP and EPF monies in the Time dotCom IPO bailout, which would mean a violation of the statutory duties of the KWAP and EPF and the unlawful investment of KWAP and EPF monies.
Deputy Finance Minister, Dato’ Dr. Haji Shafie bin Salleh told Parliament on 29th March 2001 that the involvement of KWAP through private placement of 55.25 million shares worth RM182.33 million and purchase of 721.19 million shares worth RM721.19 million was because of its obligation as sub-underwriter as a result of the IPO’s under-subscription.
He said that the decision of KWAP to sub-underwrite the Time dotCom IPO was made in October 2000 when the shares situation was good, with the KLCI in the region between 750 and 790 and KWAP had not expected the stock market to plunge six months later.
This is a most shocking explanation - as it is most extraordinary, imprudent and downright negligent for any underwriter or sub-underwriter to make a commitment to guarantee any IPO issue six months ahead of the issue, regardless of market developments and changes.
More than two weeks before the Time dotCom IPO, when there was still opportunity for the KWAP Investment Panel to review its sub-underwriting commitment, the Business Times of Singapore in its report of 5th January 2001 ran the following headline: “Investors likely to snub Time dotCom's IPO - It is being launched at a bad time after a long delay”, predicting that the Time dotCom IPO would get “the cold shoulder from investors”.
The KWAP not only did not follow media reports about the market condition, it also did not follow the movements of the stock market, as by 22nd December last year, the KLCI had fallen below the psychological barrier of 700 points to plunge to 696.39, 679.64 on 26th December, 666.63 on 2nd January 2001 and 657.52 on 3rd January.
The “sub-underwriter” explanation is most unbelievable. In the first place, when did government-linked funds like KWAP start playing the role of underwriter or sub-underwriter for IPOs of select companies?
It was an illegal use of the KWAP funds to sub-underwrite the Time dotCom IPO as the Pensions Trust Fund Act 1991 (Act 454) under which KWAP was established did not empower the KWAP to go into the business of underwriter or sub-underwriter for IPOs of shares of companies.
What is shocking is that KWAP was not playing the role of a sub-underwriter in the Time dotCom IPO, but was in fact its real and biggest but “secret” lead underwriter with the unprecedented size of 48 per cent guarantee for the Time dotCom IPO. This commitment exceeded that of the publicly-announced three “Joint Lead Underwriters” announced in the IPO prospectus, namely Commerce International Merchant Bankers Berhad, Perwira Affin Merchant Bank Berhad and Affin-UOB Securities Sdn. Bhd. and seven “Other Underwriters” who were clearly phoney “Joint Lead Underwriters”.
Why should the KWAP be involved in such a subterfuge to hide its true role as the real “lead underwriter” and guarantor for the RM1.88 billion Time dotCom’s IPO, claiming only to be an “sub-underwriter” so that its identity would not have to be publicly advertised in the Time dotCom IPO prospectus?
In the public interest, the Cabinet should direct that the full terms of KWAP’s so-called “sub-underwriting” agreement for Time dotCom’s IPO d be made public, giving details as to its major clauses and provisions, the size of the underwriting and whether it was a "firm commitment" or "best efforts" agreement.
The KWAP “sub-underwriting” of the Time dotCom IPO is an unlawful and criminal misuse of public funds, and members of the KWAP Investment Panel should be prosecuted for criminal negligence in investing RM903.74 million in Time dotCom IPO resulting in RM367 million losses.
Under the Pension Trust Fund Act 1991, the KWAP Investment Panel comprised:
(i) The Chairman of KWAP, who is the Secretary-General of the Ministry of Finance;
(ii) a representative from Bank Negara;
(iii) a representative from the Accountant-General’s Department;
(iv) three other members with business or financial experience who shall be appointed by the Minister.
The Cabinet tomorrow should decide on a full public disclosure statement to explain what actions had been taken in the Time dotCom IPO bailout scandal, whether former Finance Minister Tun Daim Zainuddin was implicated and if so, why he and other officers responsible for the criminal negligence, criminal breach of trust and criminal misapplication of public funds had not been prosecuted and brought to justice.