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DeClout chairman ups stake as company battles activist investor Lloyd Moffatt

Benjamin Cher
Benjamin Cher • 4 min read
DeClout chairman ups stake as company battles activist investor Lloyd Moffatt
SINGAPORE (May 7): DeClout CEO and chairman Vesmond Wong Kok Khun has raised his stake in the IT services company amidst efforts by investors to replace members of the board at DeClout and its subsidiary Procurri Corp. Wong bought one million shares for $
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SINGAPORE (May 7): DeClout CEO and chairman Vesmond Wong Kok Khun has raised his stake in the IT services company amidst efforts by investors to replace members of the board at DeClout and its subsidiary Procurri Corp. Wong bought one million shares for $92,580, or 9.258 cents a share, on April 27, bringing his stake to 82.1 million shares, or 12.4%.

In an April 28 announcement, DeClout says Wong had received a WhatsApp message from Lloyd Moffatt requesting that Wong resign as chairman ahead of the company’s AGM on April 30. Moffatt is the director of Wickhams Hill Capital, a financial advisory firm servicing a few accredited investors.

In the text message, Moffatt also requested that Nicolas Van Broekhoven replace Raymond Ho as the current lead independent director of Procurri. Wong was asked to “seek a waiver allowing Procurri to complete the Rockland acquisition through whatever means is best for Procurri shareholders” and to appoint an independent agent with regard to a $10 million loan DeClout took from six lenders.

The WhatsApp message also threatened that Moffatt and other unnamed parties “will continue lobbying regulators, pursuing directors and associates, and publishing further materials ahead of the AGM” should the demands not be met.

Moffatt claims to represent a group of minority shareholders who together hold an undisclosed amount of shares in DeClout and Procurri. According to an article in The Business Times last month, the group had met ­DeClout’s management several times and urged management to realise value in both DeClout and Procurri. They had asked for an in specie distribution of Procurri shares to DeClout shareholders.

In April, DeClout took a two-year 8% loan of $10 million from six private investors and businessmen. The loan is secured by DeClout’s 46.8% stake in Procurri as well as corporate guarantees provided by two other DeClout subsidiaries: vCargo Cloud and Beaqon. One of the terms of the loan is that Wong remains executive director and CEO of DeClout.

The minority shareholders say the loan strips minorities of their right to elect board representatives and is not in the best interest of shareholders.

Shortly after the loan was announced, the Singapore Exchange issued a number of queries to ­DeClout. Among other things, SGX had wanted to know how the loan agreement was in the best interest of DeClout and minority shareholders, and whether ­DeClout’s board had attempted to raise money via the secondary market.

DeClout’s response was that a loan addresses “possible concerns on shareholding dilution”, which had been raised at the company’s AGM in April last year and at an investor event.

The board of DeClout has expressed serious concern about the nature and the contents of the WhatsApp message that Wong received. DeClout says the demands are not in accordance with the constitution of the company, Companies Act or SGX Listing Manual, “and are certainly not in the spirit of good corporate governance”.

DeClout says it may review the current board composition by separating the chairman and CEO roles, but that “the manner and content of the message from Mr Moffatt are not constructive to this process”.

“The board urges all shareholders to engage the company and its management in a civilised and meaningful manner, and to be mindful and respectful of the rights of other shareholders,” says DeClout in its filing.

Shares in DeClout have declined 45.9% in the last 12 months while those of Procurri are down 18.8%. For FY2017 ended December, ­DeClout reported a 10% y-o-y decline in rev­enue to $273.5 million. The company reported a loss of $16.4 million, versus earnings of $7.8 million in FY2016.

DeClout invests in and incubates companies. Its revenue fell after the trade sale of one of its portfolio companies, Acclivis Technologies Solutions. The losses were also partially related to the sale of Acclivis, which resulted in one-off charges.

For 1QFY2018, DeClout managed to return to the black with earnings of $0.2 million. Revenue rose 12.9% to $71.3 million, lifted by contributions from Beaqon, vCargo and Procurri.

Wong is DeClout’s largest shareholder. The second-largest shareholder is Melvin Poh, founder and managing director of property developer Fission Group, with a 12.2% stake. Poh acquired 78.1 million shares from a Wong Poh Leng in an off-market transaction on April 17 at 11.8 cents a share. He followed this up with a purchase of 2.7 million shares at an average of nine cents a share from the open market.

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