Democratic Progressive Party (DPP) legislators yesterday questioned Financial Supervisory Commission (FSC) Chairman William Tseng (曾銘宗) about a controversy involving Chinese Nationalist Party (KMT) Taipei mayoral candidate Sean Lien’s (連勝文) holdings of Golden Meditech Holdings Taiwan Depositary Receipts (TDRs).
During a question-and-answer session on the legislative floor, DPP legislators Chen Chih-mai (陳其邁), Yeh Yi-chin (葉宜津) and Lin Shu-fen (林淑芬) questioned Tseng about Golden Meditech TDRs’ plunge in value after the company listed the TDRs on the Taiwan Stock Exchange in January 2011.
Golden Meditech was the first Chinese healthcare company to list its depositary receipts on the Taiwan Stock Exchange.
Foreign companies or Taiwanese-owned firms based overseas can list on the exchange or the GRETAI Securities Market either through an initial public offering or a secondary listing via TDRs.
Golden Meditech’s TDRs fell nearly two-thirds of their initial value after the listing and after Lien had endorsed them as the company’s major shareholder, triggering criticism that Lien had “cheated” the public.
Lin said the Control Yuan had cited the Financial Supervisory Commission in 2012, saying its TDR administration was plagued by several loopholes.
“It [the Control Yuan] said that first, the financial statements of Chinese firms were frequently flawed and [the government] had no way to examine the false information. Second, compensation for securities fraud committed by foreign enterprises was hard to come by. Third, many TDR offerings had their stock prices reduced right after the issuance, and fourth, the TDR-issuing enterprises did not reveal enough information,” Lin said.
Lin asked Tseng why Golden Meditech, after securing a NT$3 billion (US$9.9 million) syndicated loan from the nation’s eight partially state-owned banks, had its shares suspended in Hong Kong earlier this year.
Replying in general terms, Tseng said the reason was complicated.
Pressed again by Lin, Tseng said the suspension was the result of the company “needing to clarify its financial statements.”
“Do our state-owned banks not look at companies’ financial statements before issuing loans to them?” Yeh said. “Or is it because there was a ‘door god’ — Sean Lien — there?”
“When it [Golden Meditech] applied for a loan its share price was NT$18, but now it has now dropped to NT$10 or NT$8,” Lin said.
The loan to Golden Meditech was legitimate, Tseng said, adding that a bank would demand additional collateral if a company that had taken out a loan saw its share price drop.
Asked by Lin what collateral Golden Meditech had provided for the loan, Tseng said he needed to check and would report back to the legislator.
Chen brought up remarks that Lien made on Monday night on Watchout — an Internet media outlet established by a group of young people that calls for government transparency.
Lien said on Watchout that he would drop out of the election if he was found to have sold a single share of his approximately 800,000 shares of Golden Meditech’s TDRs.
He also said that neither he nor his wife have sold any of their shares in Golden Meditech.
“What he [Lien] did not reveal was that he is also a major shareholder of Evenstar, which owns about 7 percent of Golden Meditech and the latter had a NT$3 billion syndicated loan from the state-owned banks,” Lin said.
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