Friday, 6 May 2016

My View On Robertl's Reportings

Publish date: Thu, 7 Jan 2016, 10:54 AM 

Blogger Robertl recently attracted a lot of attention.

Last week, he published an article to describe Xinquan's operation in China.

I actually complimented him for his works. The Xinquan case if proven to be true, will have dire consequence on its shareholders. It needs to be addressed / clarified, not something to be swept under the carpet under the pretext of maintaining harmony.  

These few days, he published two articles about Hevea. One talked about the internal feud among Board members, the other talked about Hevea's containers getting stuck in Korea.

This round, I am not so sure that what he did is correct.

Both Hevea articles shared one common feature - they generated big hoo hah in the initial hours, but as calmness returned, many people realize that the issue was not as threatening as it looked :-

(a) The Boardroom dispute is indeed ugly, but is it of iceberg proportion that it can sink a Titanic ? Based on my experience, Public Listed Companies are usually quite resilient. This is because they are institutionalised. Most of the time, they operate on auto pilot basis. Board room disagreement very seldom will lead to massive shareholder value destruction.

So far, a more serious case is Kian Joo. Internal dispute ultimately resulted in the family losing control to Can One. I believe there are also Boardroom disagreement in many other PLCs. Those PLCs continue to function as normal even though the disputes had been kept away from the eye of the public. Is there really a need to reveal all these information to the public ? What benefit does that create ?    

One point raised by Robertl was that the relevant Court cases had not been made known to Bursa. If those cases indeed exist and they failed to announce them, it is a breach of Bursa regulation. I don't dispute the notion that it is bad corporate governance. But again, I don't think it is life threatening either. The Directors will properly get fined few hundred thousand Ringgit and very soon the issue will be forgotten and investors will shift their attention to other more important issues.  

What I am trying to say is that there is no need to be overzealous about corporate governance. Severe cases such as frauds and theft should not be tolerated. But it is impractical to insist that everything has to be squeaky clean. Top people in PLCs will sometime do dodgy things. But most of the time, it won't lead to massive shareholder value destruction. There is no need to vigilante against every case. We are not in a temple or church.           

(b) I am not sure whether the Korea issue is real (the PLC will likely come up with a statement later today). Even if it is real, is it so life threatening that it has to be made known to the public in such a fashion ? According to other forum members, Hevea only derived 7% of its revenue from Korea. 

Even if the amount is bigger and the impact is more severe, it is nothing more than an OPERATIONAL ISSUE. Things like that happen EVERYDAY in many many other PLCs. That is part of business. Nobody airs them out in public forum like this. The common practice is for the PLCs to quietly work on the problem and disclose it in the quarterly report (if necessary), as part of earnings discussion. Investors will take note of the issue, make the necessary adjustment to their portfolio and move on with life. 

Concluding Remarks

As a blogger, I too write articles. But I am always careful not to write something that will cause share price to tank, unless the case is really severe that it warrants such a move.

Many investors have their hard earned money parked in the market. We should take that into consideration before we publish anything that will have adverse impact on share price.

Many investors reacted to the articles by cashing out of Hevea. Some forego future profit, some incur losses. If later Hevea share price recovers, many of these investors will turn out to have made a mistake.    

This kind of thing is complicated, it is best we try to keep their occurence to a minimum. 

In this world, many evil things are done under the name of freedom of speech, balanced views, promoting good corporate governance, and other lofty principles. Very often, they do more harm than good.

We should be vigilant against the vigilante.  

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