Tuesday, March 27, 2012

MTouche: The case where they caught up with other people's BullS***? (Updated)

MTouche was never meant to be a very profitable company, or at least one with decent results. Some VC (check the name!) was probably the one doing the behind works for them. Just look at last 7 years performance, you see the wild swing in profits - probably some financial engineering if you look at the receivables trend.

Just recently, there were articles claiming that the 2 largest individual shareholders were set to lose their control of the company. These are young guys (or were) who relied on market players, who understand the ins and outs of the retail market very well. The result, wild swing in share price as well and along the way, there was a rights and warrants issued to raise more funds for the company. Everyone seem to be heroes here, or so it seems!

Problem is that the 2 directors (who are also the largest individual shareholders) had to raise funds to pick up those rights at RM0.80 per piece sometime around November 2007. What happened after the issuance of rights? They increased their personal debts, hence more of their unpledged shares had to be pledged while the share price kept on dropping. Basically they had to pledge almost all of their shares after the rights issuance to pick up the shares. The largest setback is that post-rights issuance, the shares tank! Hence the total financing against the shares was out-of the money.

This is also probably why MTouche did quite a lot of share buybacks, to rescue their shares from being clawed by the financier. At last, they clawed anyway!

What is the lesson in this? If you are just a pawn in a chess game, the players will decide when you leave and stay. This is if you believe in other people's BullSh**

I also wonder what is the value in the company besides the RM21 million in the coffers for Kamaruddin Meranun and gang to do a takeover if the rumours are true? Is this another fools theory that we can use as case study?

Hence Serious Investing is much safer than Trading, perhaps!

2 April 2012 - Latest news on MTouche - Goh Eugene, the CEO got back all his shares as the transaction was reversed - wonder what actually happened. A big block of his shares was originally sold to a shell company Resolute Force Sdn Bhd.

 If Goh Eugene has control, why would the shares be sold and be reversed.

23 April 2012 - another married deal done - with 30% of MTouche's shares being traded off market with the CEO and ED sold out to an unknown company called Homegrown Media Sdn Bhd. Probably a vehicle used to just trade the counter. The issue here is that even though the 2 largest shareholders sold out, no directors resign. Will not be surprise if this stock has been cornered.

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