DAP calls on Bank Negara and Securities Commission to conduct investigations into the RM1.88 billion Time dotCopm IPO fiasco as to whether the full underwriting by three lead banks and seven other banks were "phoney" when the real underwriters for the issue were government-linked funds and agencies.
This follows the Finance Minister, Tun Daim Zainuddinís explanation
on Tuesday that KWAP acquired the lionís share of 48 per cent of
Time dotComís IPO issue of 571.7 million shares or 63.9% of the unsubscribed
IPO portion of 428.83 million shares, ploughing some six per cent of its
total funds by taking up 273.86 million shares of the unsubscribed portion
of the Time
dotCom IPO at the cost of M903.74 million because it was a sub-underwriter of the companyís IPO as it had expected the shares to be oversubscribed.
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 it is unlikely that a lead underwriter would assume more than 20 - 30 per cent of the issue while an ordinary underwriter would take more than 4 - 5% of the IPO each.
It would be most absurd for a sub-underwriter to guarantee or 48 per cent of the Time dotCom IPO issue, when a lead underwriter would not asume responsibility for more than 20 to 30 per cent of the issue or an ordinary underwriter more than 4 - 5% of the issue.
Something is very fishy when KWAP as a sub-underwriter assumes greater financial commitment for the Time dotCom IPO issue to the tune of RM903.74 million or 48 per cent of the entire IPO issue!
This raises the question whether the full underwriting by three lead banks and seven other banks were "phoney" when the real underwriter for the issue were government-linked funds and agencies, and if so, why should the government be involved in Time dotComís IPO.
It is in the public interest that the full terms of KWAPís sub-underwriting agreement for Time dotComís IPO should be made public.
The sub-underwriting contract of KWAP for Time dotCom IPO should be laid in the current meeting of Parliament, 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.
Under a firm-commitment agreement, the underwriter pledges to buy all the stock offered in the IPO and resell it to the public. Under a best-efforts commitment, the underwriter, using its best efforts to sell the stock, is under no obligation to purchase the stock should part of the issue remain unsold. An underwriter who considers the issue "risky" may prefer this type of agreement to shift the risk to the company.
If KWAP had entered into a "firm commitment" agreement to sub-underwrite 48 per cent of the Time dotCom IPO, it should explain why and what it expected to profit from such an agreement.