Since my last coverage on Noble Group in December 2017, things have taken a turn for the worse. In fact, the on-going drama is so bad that its good. Why is there any good out of this corporate tragedy if you may ask? In my opinion, there are plenty of hard lessons that investors can gain from the downfall of Noble Group.
From a former multi-billion blue chip darling as recent as 2015, Noble Group has shrunk to a mere $188 million listed company. Novice investors who are new to the game should avoid this counter if they are not unaware of the series of events that had unfolded on this counter. Indeed, there had been so many twists and turns to the Noble Group drama that one wonders if the latest alliance between Goldilocks and Noble Group is just another false dawn in the making.
Due to the volatility of Noble Group share price, existing shareholders should exercise caution on whether to dollar average their holdings or cut losses. This article is only for information and not meant to induce or serve as a form of financial advice.
Holding shareholders to ransom?
In my last coverage, I highlighted the credit crunch that Noble Group was facing. As a commodity trader, having access to credit facility is vital to the company. Arising from this issue, Noble Group entered into a Restructuring Support Agreement (RSA) with senior creditors. The original plan was to move the assets into a new firm, with existing shareholders getting 10% stake in the restructured entity. The RSA would require approval from both creditors and shareholders.
While Noble Group had no problem garnering support from the creditors for its debt-for-equity scheme, shareholders were of course unhappy that if the shareholders voted against the proposal, the Group would apply for an administration order in United Kingdom (the Alternative Restructuring). But what riled shareholders was that those who choose to dissent would get nothing.
The controversial scheme obviously led to numerous condemnations from all quarters. Is this the rightful way to treat shareholders who had believe in Noble Group and bought their shares in the first place? Isn’t such act akin to holding them to ransom? I did not buy any Noble Group shares but to be frank, I felt that shareholders were being bullied into accepting the proposal. I am just being objective here, nothing personal.
The brazen act by Noble Group even caused SGX [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
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