From March 2017 to August 2018, Spackman Entertainment Group Limited (SEGL), which is listed on Catalist, increased its stake in its Hong Kong associate, Spackman Media Group Limited (SMGL), from 24.53% to 43.88% through five share transactions made under share purchase and sale and share swap agreements. The transactions were said to be with “certain existing shareholders of SMGL” who were “unrelated third parties”. SEGL paid US$3 for each of the additional shares acquired, which was a significant premium over the NTA and NAV of SMGL.
Between June 2018 and March 2021, I published six articles and updates about these transactions and related developments. Two articles in particular, “Watching Spackman Entertainment” posted on 2 September 2020 and “Spackman Entertainment Presents…#Barely Alive” posted on 31 October 2020, described in considerable detail the five share transactions, and the key entities and individuals involved. These articles were based on public information on SMGL obtained from public company records in Hong Kong, and US court records available online. I was able to establish the entities and individuals who were involved in the five share swap transactions in 2017 and 2018, and they do not appear to be “unrelated third parties” at all. The US$3 per share that SEGL paid to acquire the SMGL shares was considerably higher than what these purported “unrelated third parties” had paid for those shares.
On 3 September 2020, SGX Regco issued a Notice of Compliance (NOC) to SEGL which directed the company’s Audit and Risk Management Committee (ARMC) to undertake a “holistic review” of the five share transactions. SEGL subsequently announced on 20 October 2020 that the company’s ARMC had, in consultation with SGX Regco and the company’s sponsor RHT Capital, appointed Deloitte & Touche Financial Advisory Services Pte Ltd as an independent reviewer . It has been 1.5 years and the independent reviewer’s report has still not been made public.
On 12 January 2021, in response to SGX queries asking for an update of the independent review, SEGL said: “As at the date of this announcement, the ARMC has been informed that the independent review is expected to take approximately three (3) months upon the provision of all the required information, documents and records, following which the first draft of the report is expected to be circulated to the ARMC, the Sponsor and SGX Regco. The ARMC would like to reassure shareholders that there has been progress in respect of the independent review and the Company will continue to devote the necessary resources and efforts to complete the independent review as soon as practicable”.
On 16 April 2021, the company announced that “first draft of the independent review report is expected to be made available to the ARMC by the mid/end of the third quarter of 2021”.
Then on 4 October 2021, the company announced that “as some of the interviewees were overseas, it took a longer time than anticipated to receive responses to the request for the interviews. Therefore, the interview process only commenced at the end of June 2021 and was completed in the first week of July 2021. Subsequent to the completion of the interviews, additional information/documents were also provided and the Independent Review commenced the drafting of the report. The ARMC wishes to announce that…the first draft of the independent review report is being finalized and shall be ready for maxwellisation process by the end of October 2021”.
On 2 December 2021, SEGL announced that “the first draft of the independent review report has been issued to the relevant parties for maxwellisation process. The relevant parties have completed their review of the first draft of the independent review report and are in the process of finalising their comments on it. The completion date of the final independent review report can only be determined at a later stage”.
There has been no further update since then.
Why is SGX Regco allowing SEGL so much time to conduct the independent review, and finalise and publish the independent reviewer’s report? What kind of precedent is SGX Regco setting for other independent reviews?
Meanwhile, SEGL has continued to undertake various corporate actions, its shares continue to trade, and its share price has kept falling. After listing in July 2014 through a private placement at $0.26 and reaching a high of $0.52 post-listing, it fell to $0.174 just before the first of the share transactions on 2 March 2017. By Friday, 22 April 2022, it had closed at $0.003 (although it closed higher at $0.005 on 25 April 2022). SEGL shareholders deserve answers fast.
Hopefully, the final report will be made public before the next instalment of Spider-Man arrives in the theatres.
