Hontex International investors agree on HK$1b refund

Most small stakeholders vote to return shares to the sport fabric maker at its last trading price after SFC's claims of misleading IPO data

PUBLISHED : Tuesday, 21 August, 2012, 12:00am
UPDATED : Tuesday, 21 August, 2012, 4:52pm

Shareholders of sport fabric maker Hontex International have approved its HK$1 billion buy-back of shares issued from its troubled 2009 initial public offering.

Chen Fang-kun, independent non-executive director at the company, said 99.3 per cent of participants at an extraordinary shareholder meeting yesterday gave the green light to the repurchase scheme.

Hontex will pay HK$1.03 billion, or HK$2.06 per share, to buy back all the shares owned by the 7,700 small shareholders, who either subscribed for the IPO or bought after the listing. The offer is equal to its last trading price.

In June, a Hong Kong court ordered the company to refund money to small shareholders after the Securities and Futures Commission alleged it had provided misleading information by overstating its profit and turnover figures in its listing prospectus in 2009. The move marks the first time the regulator has sought compensation for investors.

Hontex, founded and chaired by Taiwanese Shao Ten-po, runs a factory in Fujian. It listed on Christmas Eve 2009 but the SFC suspended it from trading in March 2010, meaning it has traded for only 64 days.

Shao did not attend yesterday's meeting, which was hosted by Chen and fellow independent non-executive director Lu Chien-an. "Hontex is still running normal business operations. We have done our best to protect the interest of small shareholders," Chen said.

He said the company would hire an investment bank to review if it should continue listing after the buy-back.

About 100 retail investors attended the meeting. Most were happy to get their money back, but some complained of losses as the offer price was below the IPO price of HK$2.15. The shares traded between HK$1.87 and HK$2.63 before the suspension.

"It has taken too long for the SFC to resolve the case. The shares traded for less than three months, but I have to wait more than two years to get my money back," an investor said.

Another man said he would suffer a modest loss. "It is not a perfect solution but not too bad. At least I can get most of my investment back. The SFC has done a good job asking the company to pay back investors. But the regulator should tighten regulations on listing sponsors further to force them to ensure information in the prospectus is accurate."

One woman said she was happy to have her money back. "I want to spend [it] on a good meal." The SFC said it would work with three Ernst & Young partners appointed by the court to handle the refund.