This article first appeared in The Edge Financial Daily, on April 27, 2016.

KUALA LUMPUR: Sona Petroleum Bhd’s shareholders have blocked the special purpose acquisition company’s (SPAC) proposed qualifying asset (QA) with more than three quarters of them voted against the proposal in the extraordinary general meeting (EGM) yesterday.

This was despite management’s effort to propose capital repayment of RM90 million to garner shareholders’ support. Furthermore, the price tag for the proposed QA, which was to take over Australia’s Stag Oilfield, had been slashed by half to US$25 million (RM98.14 million).

The news sent Sona’s warrant price downhill; the derivative shed 67% to one sen yesterday, from the previous day’s closing of 2.5 sen. In a stark contrast, Sona’s share price gained 1.2% to close at 43.5 sen yesterday.

Sona has until July 30, about three months from now, to submit a fresh proposal for its QA. However, Sona independent director Datuk Mohamed Khadar Merican said Sona did not have plans to submit another proposal as management is aware that a few substantial shareholders are “yield investors”, who are not keen on the oil assets.

“I am not sure whether that [is] going to be a good idea, as we have given them very good assets. Unfortunately, there are [a] few big shareholders who are not keen on the oil assets and aim for yield.

“If they did not vote for [the oil assets] this time, I don’t think there is any reason for them to vote for [the oil assets] next time, unless there are changes in the shareholding,” Mohamed Khadar added.

Credit Suisse Securities (Europe) Ltd is the second-largest shareholder of Sona, with a shareholding of 13.027% as at April 13, after Platinum Autumn Sdn Bhd, which controls a 20% stake in the company.

By end-July, Sona will have to liquidate the company and return the RM495 million cash in its trustee account to shareholders. There is no deadline set by the Securities Commission Malaysia for the completion of the liquidation process.

Sona is the first SPAC on Bursa Malaysia whose proposed QA has been rejected by shareholders. This may not be surprising given the current poor sentiment on oil and gas companies.

According to Sona, about 77.39%, or 647.98 million shares, of the votes cast in the EGM were against the proposed QA, while 22.61% (189.33 million shares) were for it.

Given that the proposed QA has fallen through, the question now is when Sona shareholders could get back their share of the cash in the trust account. The Equity Guidelines state that an SPAC has to be liquidated and return all its trust account funds should it fail to secure a QA within the stipulated time frame of three years.

“We still have three months until July 30 before we do anything to the company.

“We have not gone into details on what we can do. I think we have to run through the options with our lawyers and investment bankers,” said Mohamed Khadar, who chaired the EGM yesterday.

Mohamed Khadar said the board will be working together during this period of time to see what they could do to protect shareholders’ value before the expiry date.

In a separate statement, Sona managing director Datuk Seri Hadian Hashim expressed his disappointment, although the board respected the shareholders’ decision.

“We are very disappointed with the decision of our shareholders as management has worked very hard and diligently to do what is the best for shareholders, based on the highest standards of governance and integrity,” he shared.

Hadian and chief financial officer Datuk Maznah Abdul Jalil are deemed interested in Sona through their equity stakes in Platinum Autumn. Being the promoter of the SPAC, Platinum Autumn is not entitled to the cash in the trustee account.