CTBC Financial Holding Co (中信金控) shares yesterday surged to a five-year high following rumors of a looming proxy fight for management control.
More than 207 million CTBC Financial shares were traded on the local bourse, with intraday transactions reaching NT$3.96 billion (US$126.07 million), beating the previous record set on Jan. 13, when 236 million shares exchanged hands.
Share prices gained 4.9 percent to close at NT$19.25, after reaching an intraday high of NT$19.7, Taiwan Stock Exchange data showed.
Local media reports this week said that Ruentex Group (潤泰集團) chairman Samuel Yin (尹衍樑) is teaming up with other tycoons to increase his stake in CTBC Financial in a bid to win management control from the firm’s founding family, the Koos (辜).
Yin has been working with former Mega Financial Holding Co (兆豐金控) chairman Mckinney Tsai (蔡友才) and Lin Chen-hai (林陳海), chairman of Pau Jar Group (寶佳機構), to buy CTBC Financial shares on the open market.
As speculation over a CTBC Financial proxy fight intensifies, the Financial Supervisory Commission yesterday said that it would not investigate infractions related to shareholdings’ status until disclosure filings and other applications have been submitted by major investors, which typically takes place before a board of directors election.
The CTBC Financial’s board of directors hold a 0.99 percent stake in the firm, which is considerably lower than its peers, Securities and Futures Bureau Deputy Director-General Sam Chang (張振山) said at a news conference.
“Current laws governing companies with a capitalization larger than NT$100 billion stipulate that board members must collectively hold a 1 percent stake,” Chang said.
“However, the required amount can be reduced by 20 percent to 0.8 percent for companies with at least 2 independent board of directors, such as CTBC Financial,” Chang said.
Companies with lower management shareholdings are vulnerable to management contests, similar to recent cases in the semiconductor testing and assembly sector, Chang said.
Foreign investors hold a majority 37.36 percent stake in CTBC Financial, overbought by more than 32.15 million shares in the firm.
Market observers have downplayed the sudden spike in turnover, saying that foreign institutions’ investment decisions are based on underlying earnings performance.
Foreign investors are likely to support the current management team in a board election scheduled for next year, they said.
Analysts have maintained their neutral outlook on CTBC Financial in light of the firm’s second-quarter results that fell short of consensus estimates.
In a note published on Tuesday, Daiwa Capital Markets analyst Christie Chien (簡民惠) said that while CTBC Financial would face continued challenges from its insurance subsidiary, she sees limited risk from capital-raising exercises in the near term.
The company’s wealth management fee income is likely to be impacted by new FSC rulings to adjust life insurers’ premium loading structures, which might crimp the bank-focused conglomerate’s earnings from selling policy products, Yuanta Securities Investment Consulting Co (元大投顧) analyst Peggy Shih (施姵帆) said.
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