KUALA LUMPUR (July 21): Bursa Malaysia Securities Bhd has publicly reprimanded Computer Forms (M) Bhd (KL:CFM) and fined eight of its current and former directors a combined RM2 million for multiple breaches of listing requirements involving the company's failed electric vehicle (EV) joint venture with EA Mobility Holding Co Ltd.
Bursa found that five listing requirements were breached by failing to make timely, complete and accurate disclosures on material developments relating to the joint venture, depriving investors of information needed to make informed investment decisions, the bourse operator said in a statement.
"Bursa Malaysia Securities views the contraventions seriously as timely, full and accurate disclosure of material information ... is of paramount importance in ensuring an orderly and fair market for securities traded on Bursa Malaysia Securities and maintaining market integrity and investor confidence," the statement read.
The breaches were all connected to Computer Forms' proposed joint venture with EA Mobility, which was announced in September 2022 as part of the company's plans to venture into Malaysia's electric vehicle industry.
On Jan 5, 2023, Computer Forms entered into a joint venture agreement (JVA) and related shareholders' agreements that required it to procure confirmed purchase orders and inject RM12.5 million into the joint venture company (JVCo) by June 30, 2023.
Failure to meet those obligations entitled EA Mobility to exercise a put option requiring Computer Forms to acquire its entire stake in the JVCo, meaning that will effectively bring the joint venture to an end.
"However, in announcing the JVA in the Jan 5's announcement, Computer Forms did not disclose the obligations and material risks of the shareholder agreements which were clearly fundamental to the joint venture arrangement to enable investors to make informed investment decisions in relation to the joint venture," according to Bursa.
The omission came during a period when the company's share price surged 163%, rising RM1.81 between Sept 1, 2022 and Jan 12, 2023, following announcements relating to the proposed EV venture.
Delayed and misleading disclosures
Bursa also found that Computer Forms continued to withhold the existence of the shareholders' agreements until Sept 25, 2023, despite repeated queries from the exchange regarding agreements containing the put option.
The company failed to meet its contractual obligations by the June 30 deadline, putting the joint venture at risk of termination. However, it issued a July 3 press release suggesting the partnership was progressing well, which Bursa deemed misleading.
"The representations that parties were in negotiations to fulfil the affirmed orders did not justify the failure to disclose the e-bus order shortfall and the imminent risk of termination of the joint venture agreement in the July 3 press release," Bursa said. By then, the company’s share price had dropped about 94%, from RM2.92 on Jan 12, 2023 to 17.5 sen on June 30, 2023.
EA Mobility had, following the e-bus order shortfall, exercised its contractual put option on July 10, 2023. However, Computer Forms only disclosed the notice 10 days later, on July 20.
"Further, Computer Forms did not disclose the termination in the announcements despite Bursa Malaysia Securities’ enquiry on the status of the joint venture agreement arising from the July 10's put option notice," Bursa said. Instead, Computer Forms maintained that negotiations between both parties were ongoing and that the JVA remained in force until the transfer of EA Mobility's shares was completed on Sept 8, 2023.
According to Bursa, disclosing the termination only on Sept 5 — just three trading days before completion of the share transfer — "deprived the market of the opportunity to make informed investment decisions".
Bursa said the directors failed to exercise reasonable deliberation and assessment to ensure the company made timely and accurate disclosures regarding the joint venture and its subsequent developments.
Former executive director Datuk Hoo Swee Guan was fined RM450,000 for a total of five breaches — the most number of breaches — including for the JVA announcement, July 3 press release, July 10 put option notice, JVA termination disclosure and shareholder agreement misrepresentation breaches.
Independent non-executive chairman Tan Sri Datuk Mazlan Lazim, former executive director Pang Nan Yew, independent non-executive director Wong Kok Seng, and former independent non-executive director Kho See Yiing were each fined RM300,000 for breaches involving the JVA announcement, July 3 press release and JVA termination disclosure.
Former executive director Datuk Wira Justin Lim Hwa Tat was fined RM150,000 for the JVA announcement breach.
Former independent non-executive vice-chairman Datuk Seri Tan Choon Hwa and former independent non-executive director Tan Li Sin were each fined RM100,000 for the JVA announcement breach.
The penalties were imposed on Computer Forms and its directors after Bursa Malaysia completed its review and considered the seriousness of the breaches, their impact on shareholders, and each director’s role and involvement.
Bursa found that the directors failed to properly review and assess the joint venture and its developments, resulting in delayed and inaccurate disclosures. Higher fines were imposed on Lim and Hoo because they were directly involved in the JVA and shareholders’ agreement.