International fund house Value Partners has cancelled a $26 million agreement to purchase convertible bonds from Semtech International Holdings, just one week after the Independent Commission Against Corruption launched an investigation into the maker of cigarette lighters.
According to a source close to Value Partners, the fund house does not want to be involved with Semtech while the ICAC investigates allegations of payments of at least $1.5 million to bankers and analysts to manipulate the firm's share price.
'Value Partners is managing money for international clients. We have to take care of our reputation and would like to walk away from the whole thing with Semtech,' the source said, adding Semtech had agreed to end the agreement unconditionally and Value Partners would not pay compensation to the firm.
The cancellation of the deal means Semtech will be unable to raise the $26 million from the convertible bond sale needed to finance new equipment.
On Monday, the ICAC arrested Semtech chairman Derek Wong Chong-kwong along with a senior executive and a secretary of the firm. Also arrested were six others, including two analysts who allegedly wrote favourable reports on the company ahead of two share placements, in May and this month.
One of those arrested was Timothy Yung, the managing director of institutional sales at VC Brokerage. Mr Yung has since been suspended from duties after it was alleged he accepted a $1.1 million bribe for arranging a share placement.