Daim said KWAP subscribed for Time dotCom’s shares as a sub-underwriter during the company’s initial public offer (IPO) because it had expected the shares to be oversubscribed.
Daim said: “It (KWAP) was the sub-underwriter. I suppose it must have expected that Time dotCom’s IPO would be oversubscribed at that time.”
This is a dumb-founding explanation. The KWAP Investment Panel must be one of the rare few of its kind in the country at the time to expect that the Time dotCom IPO would be oversubscribed.
The members of the Investment Panel owe a full and satisfactory explanation why they went against the general market investment sentiments at the time as to risk RM903.74 million of KWAP funds which could only benefit Renong and Tan Sri Halim Saad to help them to extricate from their colossal debts by putting in jeopardy the pensions and gratuities of 850,000 civil servants.
What is mind-boggling and most alarming is the “sub-underwriter” explanation. In the first place, when did KWAP and government-linked funds, like the EPF, SOCSO, the National Trust Fund, the Armed Forces Fund, Tabung Haji, start playing the role of underwriter or sub-underwriter for IPOs of select companies? Malaysians are entitled to a full explanation of the underwriting business of the government-linked funds and agencies.
Secondly, KWAP was not playing the role of a sub-underwriter in the Time dotCom IPO,as it displaced the role of the lead underwriters to become a lead “undertaker” - chalking up RM331 million losses as at noon today.
Time dotCom was traded at noon today at RM2.09 per share, or RM1.21 or 36.6 per cent below its IPO price of RM3.30 - or a staggering RM331 million loss suffered by KWAP for its RM903.74 million purchase of 273.86 million Time dotCom shares since the company made its public debut on 12th March 2001.
The Time dotCom IPO prospectus announced three “Joint Lead Underwriters”, namely Commerce International Merchant Bankers Berhad, Perwira Affin Merchant Bank Berhad and Affin-UOB Securities Sdn. Bhd, and seven “Other Underwriters”, namely Amanah Merchant Bank Berhad, CIMB Securities Sdn. Bhd, K & N Kenanga Berhad, Arab-Malaysian Merchant Bank Berhad, HLG Securities Sdn. Bhd., RHB Sakura Merchant Bankers Berhad and Utama Merchant Bank Berhad who fully underwrote the RM1.88 billion IPO issue.
One could only guess the proportion of the IPO issue underwritten by the three lead underwriters and the seven other underwriters, but a fair guess could be CIMB 30%, Perwira Affin 20%, Affin-UOB 20% with the seven other underwriters collectively taking up the balance of 30% of the IPO or about 4 - 5% each.
The three lead underwriters and seven other underwriters would have distributed their financial commitments into smaller lots to sub-underwriters - but it would be unthinkable and absurd for any sub-underwriter to underwrite a commitment greater than any underwriter or lead underwriter.
This absurdity obtains with regard to KWAP’s sub-underwriting the Time dotCom IPO, as its payment of RM903.74 million comes to 48 per cent of the RM1.88 billion IPO issue - which would be greater than the commitment of anyone of the lead or ordinary underwriters, including CIMB!
KWAP should explain how it had transformed itself from sub-underwriter to a lead “undertaker” losing RM331 million from its Time dotCom investments as at noon today.
The KWAP scandal raises public concerns about the safety and quality of government-linked funds and agencies, and I am asking for a meeting with the Finance Minister to discuss not only KWAP’s transformation of its role as sub-underwriter to Time dotCom IPO to lead “undertaker” but also the investment policy, accountability and transparency of government-linked funds and agencies.
I feel very sad that instead of supporting my efforts to demand greater accountability and transparency in government-linked funds and agencies, a business newspaper like the Business Times should come out with the most sycophantic editorial to defend KWAP’s transformation from the Pensions Trust Fund into a “Bail-out” Fund for the Time dotCom IPO.
In an editorial entitled “DAP hopes to ring up political mileage”,
Business Times said:
“Both local and foreign analysts had expected Time dotCom's IPO to be undersubscribed and for prices to perform dismally given the sluggish mood of investors around the world.
“It is unfair to accuse KWAP of bailing out Time dotCom, as if it is not the only party involved in buying a stake in the company.
“Various other parties, including banks, are involved in the underwriting and sub-underwriting arrangements.
“Lim must also not forget that individual investors, some of whom are small-timers, had subscribed for Time dotCom shares as well.
“Are these individuals also bailing out Time dotCom, or are they making a sound, long-term investment after going through the prospectus of the company? KWAP bought 274 million shares in Time dotCom for close to RM1 billion.
“If the share price of Time dotCom had gone up rather than dropped, would it have been viewed as a bailout by the DAP chief? If the share price of Time dotCom goes up to RM10 by the end of this year, how will Lim justify his action against the fund? The decision by the KWAP should not cause unnecessary suspicion.”
In this very confused editorial, which on the one hand unintentionally faulted the KWAP for not realising that “both local and foreign analysts had expected Time dotCom IPO to be undersubscribed and for prices to perform dismally” and on the other supporting KWAP’s investment in Time dotCom, is the most eloquent testimony as to what is wrong with the Malaysian mainstream press and the long road ahead before Malaysia can claim to have an independent, responsible professional press.