KUALA LUMPUR (Aug 3): Vinvest Capital Holdings Bhd’s allegation of losing its 17.82% stake in EA Holdings Bhd has caught the investing fraternity by surprise as to how this could happen without the knowledge of the parties involved.
Vinvest’s share subscription in EA Holdings back in November 2021 was aimed at opening more opportunities for both companies to collaborate and leverage on each other’s strengths. For example, Vinvest’s property development and construction projects could benefit from the smart solutions in the technology field to be provided by EA Holdings.
Having held the shares for more than a year, Vinvest noticed that all its EA Holdings shares had been sold on the open market via its TA Securities central depository system (CDS) account between June 23 and July 11.
The selling price was half a sen per share or a total sum of RM5.486 million, a huge discount compared to the acquisition sum of RM23.21 million back then.
And this prompted Vinvest to take legal action against EA Holdings over the matter, including "urgently applying for the necessary prohibitory injunctive orders to stop further derogation of the company’s rights over those shares". Vinvest has been granted an interim injunction by the High Court against EA Holdings.
In its statement of claim filed on Friday (July 28) through Messrs Wilson Lim and sighted by The Edge, Vinvest said the 1.1 billion EA Holdings shares were originally kept in Maybank Investment Bank Bhd’s CDS account for safekeeping and not used for trading. It claimed that the defendants were responsible to look after its interests since the company held the second-highest stake in EA Holdings.
EA Holdings’ annual report 2023, however, shows Vinvest was the single largest shareholder in EA Holdings with a 17.1% stake as at June 21 this year, followed by EA Holdings CEO and executive director Mohammad Sobri Saad at 7.8%.
EA Holdings is involved in ICT services, software solutions, automation systems and F&B distribution. For the 18-month period ended March 31, 2023, it incurred a net loss of RM17.47 million.
For Vinvest, its 18-month financials ended Dec 31, 2022 show a net loss of RM70.82 million, while in the latest quarterly results ended March 31, 2023, it recorded a net profit of RM743,000.
Vinvest’s major shareholders are its chief executive director Datuk Seri Chia Kok Teong (30.4%), Golden Key Portfolio Sdn Bhd (17.5%) and EA Holdings (6.5%).
In the legal suit, Vinvest has also named a 30-year-old stock market analyst from Ipoh as the second defendant.
Vinvest is alleging that fraud has been committed by both EA Holdings and the analyst, stressing that the appointment of the analyst was on EA Holdings' recommendation. Sometime in May, the analyst suggested that the company opened a second CDS account, and subsequently a second account was opened at TA Securities Holdings Bhd on May 22, with all the EA Holdings shares then deposited into the second account.
Vinvest stressed that it had no intention to dispose of the shares, and it was done without a company resolution — no forms were signed — and without its knowledge. It is perplexed as to how EA Holdings and the stock market analyst, either individually or together, had failed to detect or observe the significant change in the shareholding.
Vinvest is seeking a declaration that the transfer of the 1.1 billion shares from its TA Securities account, either on the open market or via off-market, is null and void. It further wants a declaration that the trade and transfer of the shares on June 23 is declared illegal, and that Vinvest remains the owner of the shares.
It is also seeking general damages for the losses as a result of the alleged fraudulent sales and illegal instruction or transactions.
A report was lodged with the Securities Commission Malaysia, police and Bursa Malaysia between July 17 and 21.
Shares of EA Holdings are down 33% year to date to close at one sen on Thursday, giving it a market value of RM64.5 million.
Closing at seven sen on Thursday — for a market capitalisation of RM67.8 million, Vinvest’s share price has declined 63.2% since early this year.
Vinvest files lawsuit against EA Holdings over loss of shares