Thu, Feb 28, 2019 page12

• FSC eyes firms with low NAVPS

  DELISTING: Due to their low prices, investors have characterized these shares as ‘eggs and dumplings,’ and the new rule would remove such nonviable securities

  • By Kao Shih-ching / Staff reporter
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  Tightened listing requirements for a company whose net asset value per share (NAVPS) is lower than NT$3 are expected to take effect in the second quarter, Financial Supervisory Commission (FSC) Chairman Wellington Koo (顧立雄) said yesterday.

  NAVPS, calculated by dividing the net asset value by the number of issued shares, is an indicator of a firm’s financial position, as it shows how much a stakeholder owns in terms of the firm’s assets, the Taiwan Stock Exchange said.

  In a bid to improve the quality of the local equity market, the commission approved the exchange’s proposal on Tuesday that any listed firm with a NAVPS lower than NT$3 should make improvements within three years or be delisted from the exchange, Koo told reporters at Legislative Yuan in Taipei.

  Firms which accountants doubt can continue to operate without problems would also be subject to the new regulations, Koo said.

  Currently, the regulations state that a listed firm whose NAVPS becomes negative would be delisted, but that does not effectively encourage a company to bolster its financial condition, Koo said.

  Under the new delisting mechanism, poorly performing firms would be given three years to enhance their NAVPS or they would be delisted while their shares are suspended for six months, Koo said.

  Due to their low prices, investors have long characterized these shares as “eggs and dumplings,” and the new rule would remove such nonviable securities from the local bourse, Koo said.

  Firms with a low NAVPS usually also have a low share price, the exchange added.

  “If a firm’s NAVPS drops lower than the standard NT$10, it is a sign that the firm is in a tough situation. If the NAVPS is lower than NT$3, it means that the firm is losing money and financially sick,” an exchange manager surnamed Lo (羅) told the Taipei Times by telephone.

  Profitable companies often see their NAVPS reach tens of New Taiwan dollars, Lo said, pointing to Taiwan Semiconductor Manufacturing Co Ltd (台積電), which had a NAVPS of NT$64 last quarter.

  There are 10 listed corporations whose NAVPS are lower than NT$3, including Chunghwa Picture Tubes Ltd (中華映管), a struggling LCD panel maker that applied for a restructuring in December last year, Lo said.

  The fastest way to increase NAVPS is to raise a firm’s capital, along with making more profit or decreasing debt, Lo said.

  The exchange plans to implement the amended regulations in May and begin reviewing problematic firms in May next year, which would allow them time to improve their NAVPS in the following three years, Lo added.

  So-called “zombie stocks” with an exceedingly low turnover of shares are not necessarily a cause for concern and should not be subject to the new delisting mechanism, Koo said.

  These shares exist on many markets, including China and the US, and do not harm the market as long the company’s financial position remains sound, he added.
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