Publications
Partners
THE “STRANGE” TRADES in technology company Mustek’s shares last week by CE David Kan were an attempt to prop up trading activity and maintain its listing on the Taiwan stock exchange. That’s because Mustek has such a low liquidity it’s been threatened with delisting if it doesn’t increase its share capital on that exchange.
“We have 1,5m shares issued in Taiwan and the minimum we should have is 10m. There’s no liquidity there,” says Mustek CE Kan. So he has to continually transfer shares from Johannesburg to Taiwan in order to boost liquidity. For the past five months he’s been converting his shares into Taiwan depositary receipts then selling those in Taiwan – only to buy them back in South Africa. After trading more than R6m in such transactions last week, Kan’s net sale was 400 000 shares for R1,9m. He had bought back (after “strange manoeuvres” the previous week) exactly that number.
“There’s also another reason – the arbitrage opportunity. In Taiwan the share is about 20% higher than in Johannesburg now,” says Kan. He says the arbitrage has at times been as high as 50%, as investors in Taiwan understand and appreciate technology stocks more than in Johannesburg. With 80% of the Taiwan stock exchange market capitalisation comprising IT shares – against only 1% on the JSE – it was only natural South African investors don’t pay much attention to the stock. “We’ve never received any attention here,” says Kan.
Initially dual-listed in 2003, Kan believes the Taiwan listing offers good value and that’s why he wants to cling to it. Only problem is that Mustek’s major shareholder either doesn’t see the value or is afraid of being diluted with new share issues in that market. The major issue is there’s no direct rand/Taiwan dollar exchange – and therefore unclear exchange valuations. The US dollar always has to come in between – and that lack of straightforward valuation, says Kan, makes his major shareholders edgy.
So he now has to resort to the costly and highly administrative manoeuvre to keep the shares listed in Taiwan. “I’m using my own resources to keep it,” says Kan. He says the SA Reserve Bank has given him permission for three months to transfer shares to Taiwan and receive the foreign currency in payment for those shares. “The trades are all above board,” says Kan.
“We have 1,5m shares issued in Taiwan and the minimum we should have is 10m. There’s no liquidity there,” says Mustek CE Kan. So he has to continually transfer shares from Johannesburg to Taiwan in order to boost liquidity. For the past five months he’s been converting his shares into Taiwan depositary receipts then selling those in Taiwan – only to buy them back in South Africa. After trading more than R6m in such transactions last week, Kan’s net sale was 400 000 shares for R1,9m. He had bought back (after “strange manoeuvres” the previous week) exactly that number.
“There’s also another reason – the arbitrage opportunity. In Taiwan the share is about 20% higher than in Johannesburg now,” says Kan. He says the arbitrage has at times been as high as 50%, as investors in Taiwan understand and appreciate technology stocks more than in Johannesburg. With 80% of the Taiwan stock exchange market capitalisation comprising IT shares – against only 1% on the JSE – it was only natural South African investors don’t pay much attention to the stock. “We’ve never received any attention here,” says Kan.
Initially dual-listed in 2003, Kan believes the Taiwan listing offers good value and that’s why he wants to cling to it. Only problem is that Mustek’s major shareholder either doesn’t see the value or is afraid of being diluted with new share issues in that market. The major issue is there’s no direct rand/Taiwan dollar exchange – and therefore unclear exchange valuations. The US dollar always has to come in between – and that lack of straightforward valuation, says Kan, makes his major shareholders edgy.
So he now has to resort to the costly and highly administrative manoeuvre to keep the shares listed in Taiwan. “I’m using my own resources to keep it,” says Kan. He says the SA Reserve Bank has given him permission for three months to transfer shares to Taiwan and receive the foreign currency in payment for those shares. “The trades are all above board,” says Kan.
