Singapore Exchange Regulation (SGX RegCo) has issued a “trade with caution” warning for investors looking to invest in the shares of Healthbank Holdings Limited (formerly SMJ International) 40B % .
The warning comes after a surge in trading volume in the company’s shares from Aug 22, 2022, to Nov 1, 2022, where 4.4 million shares in Healthbank were traded versus no trades executed in the two months before that.
The market regulator also noted the 75% surge in share prices in the company from Oct 25, 2022, to Nov 1, 2022, where Healthbank’s shares grew to 21 cents from 9 cents before.
In addition, the trading activity was mostly conducted among a “small group” of market participants who accounted for almost 80% of the total volume traded between Aug 22, 2022, and Nov 1, 2022. The company subsequently announced that it was entering into a proposed acquisition and equity transfer agreement just three days later on Nov 4, 2022.
SGX RegCo says it is reviewing the trades in Healthbank’s shares and will take the “necessary actions”.
On the same day, SGX RegCo issued a notice of compliance to Healthbank, which refers to the proposed acquisition and entry into the equity transfer agreement on Nov 4, 2022. The notice was made as an official notification to the company with immediate effect.
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The market regulator noted that the transaction, under Rule 1006 of the Catalist rules, was classified as a "major transaction" by the company. According to Rule 1006, should any of the categorised transactions - which includes "the net asset value of the assets to be disposed of" or "net profits attributable to the assets acquired or disposed of, compared with the group's net profits" - fall between 75% but less than 100%, the transaction will be deemed a "very substantial acquisition" or a "reverse takeover".
On the proposed acquisition and equity transfer agreement on Nov 4, the transaction would exceed 100% of the company's market capitalisation of $10 million before Oct 25, 2022, the period before the unusual trading was noted.
In its statement, SGX RegCo highlighted that the exchange may exercise its administrative powers to ensure that the market is "fair, orderly and transparent" and that it may impose other requirements should it deem necessary.
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It adds: "Where warranted, SGX RegCo may direct the board to conduct further due diligence, look further into material findings (if any) arising from the due diligence exercises and/or appoint other professionals to reassess the proposed acquisition and related transactions."
"Pursuant to Catalist rule 305(4), failure to comply with the requirements SGX RegCo has imposed shall be deemed to be a contravention of the Catalist rules," says SGX RegCo.
Shares in Healthbank closed flat at 14.4 cents on Feb 24.