BT: Olam ‘market talk’, what market talk?

BT: Olam ‘market talk’, what market talk?
March 19th, 2014 | Author: Editorial
Yesterday (18 Mar), Singapore’s business daily The Business Times (BT) published an article by financial journalist Andrea Soh [Link].
In it, Andrea claims that there were market rumours that could possibly account for the surge in Olam International’s (Olam) share price.

At the beginning of the article, she says:
Meanwhile, there were market murmurs that the surge in Olam’s share price prior to the announcement on Friday could have been partly due to interest by other firms in acquiring the agri-commodities trader.
Then she goes off on a tangent, only to return to it at the end of her article, where she says:
…market talk revealed that there have been at least three separate parties interested in acquiring Olam during the same period, potentially pushing up its share price as well.
Sime Darby, one of the largest palm oil producers in the world, is said to be one of them. Two Japanese trading companies are also said to be interested in Olam due to its exposure to African markets.
But she then unwittingly runs her point down by saying:
Analysts had said that they did not expect a competing offer for Olam, given that the offer involves existing shareholders with a large stake, and the complex nature of its business. [emphasis added]
She does her cause harm by using the term “murmurs”. Murmurs are words softly spoken. That means, if there really were “market murmurs”, that most of the market had not heard them. That in turn negates the possibility of Olam running up, as it did, on hefty volume.
Sime Darby, really? “Two Japanese trading companies”, LOL!
TR Emeritus (TRE) has investigated Andrea’s claims and come to the conclusion that they are completely baseless.
In this digital age, one has only to scour the various websites and forums to know if there are any rumours about anything.
TRE has searched the various websites and forums and not found the slightest hint of any competing interest in Olam during its price surge in February and early March 2014 prior to the announcement of Temasek’s takeover bid.
Since Andrea uses the term “market” repeatedly, as in “market murmurs” and “market talk”, it is good to define what a market is. A market or stock market is a place (digital in this case) where people offer to buy and sell shares and their derivatives.
First we look at senior correspondent R Sivanithy, who has been with BT since the last millennium. He has been with BT so long he is almost a vampire.
Mr Sivanithy wrote a scathing article (15 Mar) that was published the day after Temasek announced their takeover bid (14 Mar) (‘Why no SGX query on Olam price surge?‘). Mr Sivanithy did not mince words:
Olam’s outperformance prior to yesterday’s announcement is simply too large and too noticeable, and has led to too many raised eyebrows to be simply brushed off as part of a sector trend. [emphasis added]
It does not take a Sherlock Holmes to deduce from Mr Sivanithy’s article that he had no idea of Temasek’s interest in acquiring Olam, not to speak of any competing interest by 3 other companies.
Then we look at Mano Sabnani’s Facebook page. Mano is the founder and chairman of Rafflesia Holdings, a media and financial consultancy company. He is well known and well respected in financial circles. He too wrote a scathing article (14 Mar) criticising all the parties involved in this fiasco [Link]:
What is upsetting is that there seems to have been a big leak of information on this takeover bid. The stock has been steadily rising on increasing trading volume in the past three to four weeks, taking it from around $1.50 to almost $2 against the generally weak local market trend.
Many small shareholders have sold their shares too early and are now crying foul. Question is why Temasek or Olam did not request for a trading halt much earlier. It is not a good example to set for the market, where so much stock has been allowed to change hands when a major development is imminent.
In such a takeover, there will be many people involved in planning it and the chances of a leak are great. An early suspension in trading of the stock would have helped to achieve a level playing field.
Instead, the players have allowed some people with advance knowledge to benefit. They could have bought the stock around $1.50 and now are set to reap a near 50 per cent gain within a few weeks, given the $2.23 offer on the plate.
The authorities in charge of regulating the Singapore market should look into this matter, notwithstanding the big parties involved. If they have been negligent in maintaining confidentiality of price-sensitive information and a level playing field, then the appropriate action should be taken against them.
Further, the SGX should consider whether the large number of investors who sold their Olam shares too early, in the share price run up of the past month, should be compensated by those who bought the shares the same month with obvious inside knowledge of the imminent takeover. [emphasis added]
Finally, we at TRE do watch the stock market very closely. We covered the Blumont-Asiasons-LionGold penny stock crash the very day that it happened (‘Penny stock crash devastates Singaporeans‘). We also covered Sky One’s equally dramatic crash (‘Worried brokerages restrict trading of penny stocks‘). As can be seen, we are very much on the ball when it comes to the Singapore stock market. We did not hear of any such rumours as Andrea claims.
Nevertheless, TRE asked people – fund managers, analysts, remisiers, investors, traders – if they had heard the rumours about Sime Darby and the 2 mysterious Japanese trading firms. The answer was a unanimous and resounding NO!
All these people did not hear any rumours of a Temasek-led buyout, let alone rumours of competing interest in Olam shares from Sime Darby and 2 unnamed Japanese trading companies.
What does all this mean? Very simple. If the market had heard nothing about interest in Olam from Sime Darby and 2 mysterious Japanese trading companies, then obviously there was no “market talk” or “market murmurs” or “market” anything whatsoever.
So where did the rumours come from?
Of course it is possible Andrea made them up. But we prefer to think she is a woman of journalistic integrity. So we are dismissing out of hand the notion that she has fabricated them.
In that case, Andrea must have heard from someone. Who could that person or persons be? That is a good question that the BT editors would do well to ask her. If not, the authorities should step in and ask her gently how she knew.
BT and the authorities might ask Sime Darby too if it is true they were recently interested in acquiring Olam and if they bought any Olam shares.
Last but not least, the timing of Andrea’s revelations is interesting. It comes just after the Singapore Exchange put out a statement (‘SGX issues hasty statement on Olam shares‘) defending itself from accusations it had neglected to query Olam on its price surge.
Was Andrea wittingly or unwittingly covering up for SGX? What do you think?

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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