Fifty suitors for QA but no deal
THE winding up of Red Sena Bhd marks the end of a seven-year run of the special-purpose acquisition company (SPAC) listed on Bursa Malaysia.
Red Sena was the last of the five SPACs that got floated on the local exchange. The first SPAC was Hibiscus Petroleum Bhd in 2011.
Red Sena was touted to be among the most promising of the lot. SPACs are meant to graduate from cash shells into full-fledged operating companies.
Alas, Red Sena has failed to live up to those expectations.
Unlike the other SPACs on Bursa Malaysia, Red Sena stands out as the only company that did not present any potential acquisition asset for its shareholders to vote on.
The firm’s management had told shareholders at its AGM last year that it had reached out to more than 50 potential candidates for its qualifying asset (QA).
Interestingly, despite the big number of potential deals, the management had then said that none of the deals were “hot prospects” and that this was due to valuations and market conditions.
Red Sena’s management added that some asset owners said there were not selling while others were looking at alternative offers.
Notably, SPACs are companies which have no operations or income-generating businesses at the point of their initial public offerings (IPOs), but undertake a listing to raise millions of ringgit for the purpose of acquiring operating companies or assets known as the QA.
To date, there were five SPACs that were listed on Bursa Malaysia, with Red Sena being the only one that focuses on food and beverage while and the other four were in the oil and gas sector.
Two SPACs have graduated into a full-fledged companies, namely Hibiscus Petroleum Bhd and Reach Energy Bhd.
The rest had to closed shop and returned the money they raised at their IPOs to shareholders.
All the SPACs had their fair share of drama from finding potential QAs, convincing at least 75% of shareholder to vote for their maiden acquisitions and yield-seeker issues.
Recall CLIQ Energy and Sona Petroleum, that fought to get their QAs approved by their shareholders.
They saw their QAs being shot down by shareholders after a series of serious attempts at drumming up the attractiveness of the asset being acquired.
Their main problem was to get at least 75% of the shareholders to vote for their proposed deals. T
his was especially hard to achieve with many of the shareholders believed to be yield-seekers.
“The SPAC model is not working anymore, it’s not an easy task to get their QAs approved,” said a market observer.
For Red Sena, the company did not announce a QA and it is closing shop after three years of looking for QAs.
In 2015, Red Sena had raised proceeds of RM400mil from its IPO in December 2015 from selling 800 million shares with detachable warrants at 50 sen apiece.
Shares in Red Sena were suspended from trading yesterday.
An estimated 92% or RM368mil from the total proceeds had been set aside for the purchase of a QA.
According to Red Sena executive director and chief executive officer Joseph Tan Eng Guan, it would take about 30 days for the liquidation process to take place, which would see the distribution of cash in the trust account to its shareholders. The distribution would be close to 52 sen a share.
“The number is subject to final determination by the liquidators,” he told StarBiz on the sidelines of the shareholders’ meeting on Wednesday.
As of Dec 17, 2018 the cash in trust assets and the non-cash trust assets stood at RM404.46mil and RM16.91mil, respectively.
On a the back of envelope calculation, shareholders of Red Sena, which bought the shares during IPO at could gain about 20% for three years.
This is far better than the performance of the FBM KLCI, which fell more than 4% in the last three years.
It is worth noting that only the shareholders of Red Sena would receive the cashback, while the warrant holders would be left with nothing. Red Sena had received unanimous votes from its shareholders to wind up the company. Hibiscus Petroleum Bhd received 99% of votes in favour of its QA.