HK firm to appeal Nasdaq removal

PUBLISHED : Monday, 28 November, 2011, 12:00am
UPDATED : Monday, 28 November, 2011, 12:00am


CDC Software, a global business-management applications supplier founded in Hong Kong, has been targeted for delisting by Nasdaq after its parent firm, CDC Corporation, received a final notice of removal from the United States stock market.

In a filing with the US Securities and Exchange Commission (SEC) last week, Atlanta-based CDC Software said it intended to request a hearing to address the concerns Nasdaq raised, and present its plan to comply with all applicable requirements for continued listing.

The disclosure was made about the same time as US investor Wynnefield Capital, which owns about 12.3 per cent of CDC Software, called on the company's board to 'terminate all affiliations with' Peter Yip Hak-yung, chief executive of parent CDC and vice-chairman of CDC Software.

CDC Software said it would also request that Nasdaq not delist the firm until Nasdaq makes a decision after the proposed hearing, which the firm expects to be scheduled early next year. The ruling on its request to delay the delisting is expected before December 12.

In its letter dated November 17, Nasdaq said its decision to delist CDC Software was based on public-interest concerns under the stock market's Listing Rule 5101 and the firm's failure to file in annual report for last year in time. Nasdaq had sent a warning to CDC Software in July for not filing that report with the SEC in accordance with listing rules. Nasdaq has halted trading in the firm's shares since October 5.

CDC Software, which has about 10,000 corporate customers worldwide, provides business applications, such as enterprise resource planning, supply chain management, e-commerce and customer relationship management systems. It was listed on Nasdaq in August 2009.

Nasdaq said its delisting decision took into account concerns raised by the New York State Supreme Court in its order dated July 13, which CDC Software disclosed in an SEC filing two days later.

The court had raised its monetary sanctions against the firm's Hong Kong-based parent in its lawsuit with Evolution CDC SPV, its largest unsecured creditor.

Evolution sued CDC in December 2009, when it claimed that it had properly redeemed CDC's 3.75 per cent senior exchangeable convertible notes and that it was owed the principal of US$41.2 million plus interest. The court ruled in favour of Evolution and awarded a judgment of US$65.4 million this September.

In its July 13 order, the court ruled that CDC 'wilfully disregarded its discovery obligations; submitted patently false testimony in certain deposition and affidavit testimony; and advanced factually and legally unsupportable defences and claims intended to frustrate Evolution's enforcement of the notes at issue in this matter'.

In its July 15 SEC filing, CDC Software also disclosed that the court, during the case's June 29 hearing, 'orally indicated that it was considering imposing personal sanctions' against CDC chief executive Yip, based on his deposition and affidavit testimony.

Nasdaq said its public-interest concerns were amplified by other factors, including its belief relating to Yip's 'ability to exert substantial influence over' CDC Software, its board and the board of parent CDC.

Yip agreed to be placed on administrative leave from July 18 while a joint special committee, comprising the independent board members of both firms, probed the matters related to the July 13 ruling.

Last month, CDC filed for bankruptcy reorganisation, which it hoped would enable it to return to financial health. According to its legal filings, the firm reported assets of US$377.4 million and total debts of US$250.2 million as of June 30.