The Taipei District Court yesterday set bail for XPEC Entertainment Inc (樂陞科技) chairman Aaron Hsu (許金龍) after prosecutors sought court approval to detain him over alleged irregularities in a botched investment from a Japanese suitor, which caused massive losses for investors.
In late May, Bai Chi Gan Tou Digital Entertainment Co (百尺竿頭) announced it would acquire 38 million XPEC shares, or 25.17 percent of the company, at NT$128 per share, an almost 22 percent premium over the gaming software developer’s share price at the time, saying Bai Chi Gan Tou was upbeat about the Taiwanese firm’s prospects.
The acquisition was valued at NT$4.86 billion (US$155.1 million at current exchange rates) at the time.
Photo: Chien Jung-fong, Taipei Times
The offer prompted investors to buy XPEC shares with the expectation that Bai Chi Gan Tou would buy their XPEC holdings.
In June, XPEC’s share price surpassed NT$110.
However, reports emerged on Aug. 19 that Bai Chi Gan Tou would delay the acquisition, which pushed XPEC shares lower. Late last month, the Japanese firm requested an extension of a deadline for making a payment on the acquisition, and on Aug. 30 it announced it was walking away from the deal, resulting in a settlement default.
The default led to XPEC’s shares dropping to as low as NT$70.2 on the over-the-counter market on Aug. 31.
Those who purchased XPEC shares after the tender offer was announced sustained significant losses. The aborted acquisition saw XPEC’s market capitalization shed NT$10 billion.
It was the first settlement default of a tender offer in Taiwan’s equity market, which caught many investors and market analysts off guard. It prompted prosecutors and the Financial Supervisory Commission (FSC) to launch investigations into the case.
After questioning Hsu, prosecutors filed an application with the court at 6:50am yesterday for permission to detain him, accusing him of breaching the Securities and Exchange Act (證券交易法).
The court later set bail at NT$10 million.
Prosecutors asked the court to bar Hsu from meeting with anyone, apart from his lawyers.
Prosecutors this week also summoned for questioning others connected to XPEC, including media celebrity and former lawmaker Sisy Chen (陳文茜) and former Taipei deputy mayor Lee Yong-ping (李永萍).
Chen resigned as an independent director of XPEC after the failed tender offer surfaced, while Lee remains an independent director of the gaming company.
Former minister of economic affairs Yiin Chii-ming (尹啟銘), another independent director of XPEC, was also summoned, but did not attend, as he was overseas.
Prosecutors said Yiin would be summoned again when he returns to Taiwan.
Prosecutors on Friday conducted a raid of XPEC’s headquarters, Bai Chi Gan Tou’s Taipei office, as well as offices of CTBC Bank Co (中國信託銀行), CTBC Securities Co (中信證) and Concord Securities Co (康和證券), which were involved in the tender offer.
Local media yesterday reported that prosecutors suspect Chinese funds of being behind the failed tender offer.
Media reports cited prosecutors as saying that Bai Chi Gan Tou could be a paper company, which has business ties with the Chinese gaming market, adding that it was possible that Chinese investors had tried to manipulate the deal.
Before the offer proposed by Bai Chi Gan Tou, XPEC issued three tranches of convertible bonds worth NT$2 billion in March.
The FSC said it suspects that the bond sales could involve insider trading and share price manipulation and has reported its suspicions to prosecutors.
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