XPEC Entertainment Inc (樂陞科技) shares yesterday continued to tumble in Taipei trading amid rumors that creditor banks would begin to liquidate a significant amount of shares they hold as collateral.
Shares in the troubled video game developer fell by the 10 percent daily limit to close at NT$21 on the Taipei Exchange.
XPEC again came under scrutiny after its latest filings to the Taiwan Stock Exchange revealed that insiders — including chairman Aaron Hsu (許金龍) and members of its board of supervisors and board of directors — had relinquished about 3.5 million XPEC shares to creditor banks.
The banks are expected to immediately liquidate the shares to minimize their losses as XPEC’s stock continues to tank, even though trading of the company’s shares and convertible bonds have been made more difficult due to flagging by regulators in light of escalating fallout, including the barring of XPEC shares from margin trading.
The Taipei Exchange and the Financial Supervisory Commission’s (FSC) Securities and Futures Bureau appear to have different ideas about the company’s saga.
The Taipei Exchange had said that the transfer of shares to the creditor banks and the anticipated sale were allowable because of XPEC’s need to satisfy its obligations to its creditors. However, after the bureau voiced its objections, the exchange later corrected its statement.
The transfer of shares had occurred during XPEC’s proposed share buyback program, which was set to run from Sept. 5 to Nov. 4, and guidelines bar stake transactions by company insiders.
During market-sensitive events such as share buybacks, there are no special exemptions to allow a firm’s insiders to transfer stock holdings, the bureau said, adding that XPEC’s actions appear to have contravened the Securities and Exchange Act (證券交易法).
Observers have said that the shares unloaded by company insiders have already been sold.
In related news, the Securities and Futures Investors Protection Center yesterday filed a lawsuit against Bai Chi Gan Tou Digital Entertainment Co (百尺竿頭), whose botched NT$4.86 billion (US$154.4 million) tender offer to acquire a 25.17 percent stake in XPEC in August triggered the Taiwanese firm’s troubles.
The suit seeks damages of NT$2.87 billion on behalf of 19,526 investors.
In addition, the center is to hold a second mediation session on reparations to affected investors next week with CTBC Bank Co (中國信託銀行), which served as the depository bank for the tender offer, and CTBC Securities Co (中國信託證券), which provided financial consulting services.
At a mediation session held last month, the CTBC units said they are not liable for losses resulting from the collapsed tender offer, even though they have been fined by the FSC for lapses in fulfilling their due diligence and verification obligations.
The FSC said the courts have placed a provisional attachment order on NT$700 million in XPEC shares held by Bai Chi Gan Tou.
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