ERI - Warrants Saga

Warrant 2012 shall not trade on the trading floor of the Colombo Stock Exchange (CSE) after the 3rd of February 2012. This decision was taken by ERI voluntarily subsequent to the SEC instruction requiring company to issue further instruction to the market regarding the trading of 2012 Warrants.

Read More
http://www.lbt.lk/corporate/announcements/1110-warrants-saga

Thanks QB.
Shame of these type of companies in CSE.

Feb 2, 2012 (LBT) - Environmental Resources Investment PLC (ERI) by way of announcement citing the Securities and Exchange Commission of Sri Lanka's (SEC) directive SEC/LEG/12/01/19 had informed its warrant holders that Warrant 2012 shall not trade on the trading floor of the Colombo Stock Exchange (CSE) after the 3rd of February 2012. This decision was taken by ERI voluntarily subsequent to the SEC instruction requiring company to issue further instruction to the market regarding the trading of 2012 Warrants.
Further SEC, in terms of the directive dated 14th September 2010, the 10% price band has been imposed on GREG-W-0002 for 03rd February 2012.
As a result of these announcements Warrant 2012 closed at Rs 1.50/- down more than 70% from the previous days price.

The rule said shall not trade ? Is that same with must not trade?
I am bad with English. Any one pls clarify
This was send on 12/1/19 ? GREG announcing it on ?

1.50+33=34.50

feel sorry about the w2 share holders

2 sapumal

Approximately, 'shall' is similar to 'must'. Shall is used for future.

Roboticfx wrote:2 sapumal

Approximately, 'shall' is similar to 'must'. Shall is used for future.

Sapumal's post has disappeared!

STOCK MARKET MANIPULATION AND SHARE WARRANTS
http://www.srilankaequity.com/2010/07/stock-market-manipulation-and-share.html

SHARE WARRANTS
Warrants are securities issued by a company which give their owners the right to purchase shares in the company at a specific price at a future date.

The warrants are tradable in their own right, and their value will go up and down as the price of the shares to which they relate goes up and down. e.g Goodco issues new shares at Rs 50 each. At the same time it gives shareholders warrants entitling them to buy shares at Rs 100 at any time until 1st January 2015.

Warrants have no right to dividends and no voting rights, so their value is tied entirely to the relationship between their exercise price and the share price of the company. If the share price is below the exercise price, the warrants are said to be 'out of the money' and they are worthless. If the share price rises above the exercise price, they are 'in the money' and worth something. e.g.Goodco's share price rises to Rs 150. The intrinsic value of the warrants is now Rs 50 (Rs 150 less Rs 100)

Note that one of the features of warrants is 'gearing'. This means that a small rise in the price of the share price results in a large rise in the value of the warrants, and a fall in the share price has an equally dramatic downward effect on the value of the warrant. e.g.Goodco's share price rises 33 per cent from Rs 150 to Rs 200. The intrinsic value of the warrant rises from Rs 50 to Rs 100 (a 100 per cent rise).

Note that the owner of a warrant does not have to buy the shares. He has a right, not an obligation. Note too that the value of a warrant can quite easily drop to zero (if the exercise price is higher than the share price) and that it will definitely be zero once the time for exercise has passed. So warrants are risky!

Section 5.10 of the Listing Rules issued by the Colombo Stock Exchange (CSE) provides the procedure and approval process in respect of applications for the listing of warrants with right of conversion to shares.

WHAT IS MARKET MANIPULATION?
Market manipulation describes a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security, commodity or currency.

Market manipulation is prohibited in the United States under Section 9(a)(2)of the Securities Exchange Act of 1934, and in Australia under Section s 1041A of the Corporations Act 2001. The Act defines market manipulation as transactions which create an artificial price or maintain an artificial price for a tradable security.

Market manipulation can occur in multiple ways:

Pools
"Agreements, often written, among a group of traders to delegate authority to a single manager to trade in a specific stock for a specific period of time and then to share in the resulting profits or losses."
Churning
"When a trader places both buy and sell orders at about the same price. The increase in activity is intended to attract additional investors, and increase the price."
Runs
"When a group of traders create activity or rumors in order to drive the price of a security up." An example is the Guinness share-trading fraud of the 1980s. In the US, this activity is usually referred to as painting the tape.
Ramping (the market)
"Actions designed to artificially raise the market price of listed securities and to give the impression of voluminous trading, in order to make a quick profit."
Wash trade
"Selling and repurchasing the same or substantially the same security for the purpose of generating activity and increasing the price"
Bear raid
"Attempting to push the price of a stock down by heavy selling or short selling."

SECURITIES AND EXCHANGE COMMISSION OF SRI LANKA - RULES, PUBLISHED IN GAZETTE EXTRAORDINARY NO. 1215/2 OF DECEMBER 18, 2001
Rules relating to Acts committed to create a false/misleading appearance of an active share market

Rule 12
No person shall create, cause to be created or do anything that is calculated to create a false or misleading appearance or impression of active trading, or a false or misleading appearance or impression with respect to the market for or the price of any securities listed in a licensed stock exchange.

Rule 13
No person shall by means of purchase or sale of any securities that do not involve a change in the beneficial ownership of those securities, or by any fictitious transactions or by any other means, create a false market in any securities listed in a licensed stock exchange.

COLOMBO STOCK EXCHANGE (CSE) - MEMBER REGULATIONS
A member firm shall prohibit its employees from fraudulent and manipulative acts or deceptive conduct as specified in the Securities and Exchange Commission Act no. 36 of 1987 and the Articles of Association of the Colombo Stock Exchange and all its subsidiary rules and regulations.

A member firm shall specifically prohibit its employees from committing the following acts:-
i) buying or selling securities for themselves or their nominees by using their customer accounts.
ii) making securities trading decisions for customers except with the customer's consent and in accordance with provided rules.

Member firms shall not execute or cause to be executed purchases of any listed security at successively higher prices, or sales of any such security at successively lower prices, for the purpose of creating or inducing of false, misleading or artificial appearance of activity in such security or for the purpose of unduly or improperly influencing the market price for such security or for the purpose of establishing a price which does not reflect the true state of the market in such security.

Member firms shall not, for the purpose of creating or inducing a false or misleading appearance of activity in a listed security or creating or inducing a false or misleading appearance with respect to the market in such security:
a) execute any transaction in such security which involves no change in the beneficial ownership thereof; or
b) enter any order or orders for the purchase of such security with the knowledge that an order or orders of substantially the same size at substantially the same price, for the sale of such security, has been or will be entered by the same or related parties; or
c) enter any order or orders for the sale of any such security with the knowledge that an order or orders of substantially the same price, for the purchase of such security, has been or will be entered by or for the same or related parties.

Stock Market Manipulation - Theory & Evidence
http://www.afajof.org/pdfs/2004program/UPDF/P306_Asset_Pricing.pdf
Posted by Sri Lanka Equity Analytics

thanks Robo. My post is still there

Quibit wrote:Warrant 2012 shall not trade on the trading floor of the Colombo Stock Exchange (CSE) after the 3rd of February 2012. This decision was taken by ERI voluntarily subsequent to the SEC instruction requiring company to issue further instruction to the market regarding the trading of 2012 Warrants.

Read More
http://www.lbt.lk/corporate/announcements/1110-warrants-saga

What does mean by subsequent to the SEC instruction ? Does SEC instruct them to stop the trade after original cut off day ? All these details are confusing.
Here is the 1st annoucement by GREG:-
http://www.cse.lk/cmt/uploadAnnounceFiles/7761325821678_782.pdf
It clearly says that W2 would trade on 6th september 2013.Of course it also says that special resolution for the aforesaid variation has to be pass on the EGM on 1st Feb 2012.If GREG does this double game purposely they should be investigated and required action should be taken.

On the otherhand here are the new announcements:-
http://www.cse.lk/cmt/upload_cse_announcements/4791328090905_.pdf
In this announcement highlighted part clearly says,
"The Direction of the SEC was that the proposed extension of the expiration date of 2012 warrants may be allowed with the approval of the shareholders subject however to the restriction on trading of the said warrants in the secondary market within such extended period from 24th February 2012 to 26th september 2013...."
This statement clearly indicates that it is due to SEC directive that trade will be restricted....

Furthur to that here is the latest announcement:-
http://www.cse.lk/cmt/upload_cse_announcements/1241328172630_.pdf
It also says,
"Accordingly we wish to inform that the warrants 2012 shall not,in terms of the SEC Directive No.SEC/LEG/12/01/19 trade on the trading floor of the CSE after the 3rd of February 2012."
This also clearly says it is due to SEC directive but...
Look at the date of that directive it is 12/01/19.Does this mean that both SEC and GREG company has known about this disaster ?
All this drama is very dirty and absolutely no any transparency.They are trying to pass the ball to each other.
If SEC has acted in honorouble manner in this bussiness they can announce a investigation on this matter.

Quibit wrote:Warrant 2012 shall not trade on the trading floor of the Colombo Stock Exchange (CSE) after the 3rd of February 2012. This decision was taken by ERI voluntarily subsequent to the SEC instruction requiring company to issue further instruction to the market regarding the trading of 2012 Warrants.

Read More
http://www.lbt.lk/corporate/announcements/1110-warrants-saga

This was not a voluntary decision as GREG says. GREG wanted their Warrants 2012 to be traded on the CSE during the extended period too (i.e until 6 Sept 2013). But SEC refused but allowed to extend the expiration period to 6 Sept 2013.

SEC should not have allowed this extension as it is unfair on the parts of Minority ordinary shareholders as well as other minority warrant holders.

greedy wrote:

Quibit wrote:.....This decision was taken by ERI voluntarily subsequent to the SEC instruction requiring company to issue further instruction to the market regarding the trading of 2012 Warrants......

This was not a voluntary decision as GREG says. GREG wanted their Warrants 2012 to be traded on the CSE during the extended period too (i.e until 6 Sept 2013). But SEC refused but allowed to extend the expiration period to 6 Sept 2013.

SEC should not have allowed this extension as it is unfair on the parts of Minority ordinary shareholders as well as other minority warrant holders.

Very Correct. I also have the same view about the extension.

If they did not allow the extension -of payment date- minority shareholders may pay at least some % as per they can and major portion of warrants may get cancelled due to inability of the major shareholders to execute.
With this, dilution of N share will be very much less and value of N will be preserved.

Now, most of the minors sold their W at very low prices and ran off from the seen.
Big people got additional one and half years to collect money. Some others got the unexpected chance to collect W at near zero cost price. Usually they have projected cash flows from other sources. During this time they can also put N to a better position.

Mekath GREG thawath sellamak da danne naha.

rijayasooriya wrote:

Quibit wrote:Warrant 2012 shall not trade on the trading floor of the Colombo Stock Exchange (CSE) after the 3rd of February 2012. This decision was taken by ERI voluntarily subsequent to the SEC instruction requiring company to issue further instruction to the market regarding the trading of 2012 Warrants.

Read More
http://www.lbt.lk/corporate/announcements/1110-warrants-saga

What does mean by subsequent to the SEC instruction ? Does SEC instruct them to stop the trade after original cut off day ? All these details are confusing.
1. Here is the 1st annoucement by GREG:-
http://www.cse.lk/cmt/uploadAnnounceFiles/7761325821678_782.pdf
It clearly says that W2 would trade on 6th september 2013.Of course it also says that special resolution for the aforesaid variation has to be pass on the EGM on 1st Feb 2012.If GREG does this double game purposely they should be investigated and required action should be taken.

2. On the otherhand here are the new announcements:-
http://www.cse.lk/cmt/upload_cse_announcements/4791328090905_.pdf
In this announcement highlighted part clearly says,
"The Direction of the SEC was that the proposed extension of the expiration date of 2012 warrants may be allowed with the approval of the shareholders subject however to the restriction on trading of the said warrants in the secondary market within such extended period from 24th February 2012 to 26th september 2013...."
This statement clearly indicates that it is due to SEC directive that trade will be restricted....

3. Furthur to that here is the latest announcement:-
http://www.cse.lk/cmt/upload_cse_announcements/1241328172630_.pdf
It also says,
"Accordingly we wish to inform that the warrants 2012 shall not,in terms of the SEC Directive No.SEC/LEG/12/01/19 trade on the trading floor of the CSE after the 3rd of February 2012."
This also clearly says it is due to SEC directive but...
Look at the date of that directive it is 12/01/19.Does this mean that both SEC and GREG company has known about this disaster ?
All this drama is very dirty and absolutely no any transparency.They are trying to pass the ball to each other.
If SEC has acted in honorouble manner in this bussiness they can announce a investigation on this matter.

The {2} point implies that though it's not tradable after 24th Feb, It can be traded up to 24th Feb. 2012.
It's my opinion that PLAYED A DOUBLE GAME, in this whole saga as usual.

1. Original GREG announcement is dated 5th Jan. 2012 and it's uploaded in the CSE on the same day. If SEC cannot agree with the terms of this resolution, they should have notify the company immediately to inform the shareholders and warrant holders about their position. WHY? Normally Share/warrant holders should be given sufficient time (21 days) to consider the resolution before an EGM/AGM. But according to available information they haven't done that.

2. According to the reference of the SEC directive (SEC/LEG/12/01/19) {(3) point} it implies that SEC has informed the company on 19th Jan. 2012. If it's so, why GREG didn't announce it until yesterday? If GREG hasn't complied, why SEC didn't inform the company to clarify the SEC position to the trading floor and make an announcement as SEC has done today?

3. Though I was not affected by this warrant saga, I strongly feel some foul play by SEC. Companies are always trying to achieve their objective in a way which is favorable to them. This is quite evident when analyzing the inquiries carried out by SEC in the past. No matter it's GREG, but almost all the respected companies in the CSE has violated the rules and either warned or penalized in the past.

4. In this case as GREG's objective is to raise money, they try to achieve it by postponing the execution date of the warrants, to avoid unfavorable market conditions. But it's SEC's duty to inform the company and investing public about its directives clearly. If SEC advised the company on time and if the company didn’t informed the investors at least through CSE, of the SEC position, SEC should have forced the company to do so without waiting till today.

What I feel is simply this. SEC ALLOWED BIG GUYS KNOWN TO THEM TO EXIT AT THE EXPENSE OF UNSUSPECTING AVERAGE INVESTORS.

Funny thing is there are many ppl to take decisions on this share but no one is ready to take responsibility and therefore many investors are finally in trouble now.

Chinwi wrote:

greedy wrote:

Quibit wrote:.....This decision was taken by ERI voluntarily subsequent to the SEC instruction requiring company to issue further instruction to the market regarding the trading of 2012 Warrants......

This was not a voluntary decision as GREG says. GREG wanted their Warrants 2012 to be traded on the CSE during the extended period too (i.e until 6 Sept 2013). But SEC refused but allowed to extend the expiration period to 6 Sept 2013.

SEC should not have allowed this extension as it is unfair on the parts of Minority ordinary shareholders as well as other minority warrant holders.

Very Correct. I also have the same view about the extension.

If they did not allow the extension -of payment date- minority shareholders may pay at least some % as per they can and major portion of warrants may get cancelled due to inability of the major shareholders to execute.
With this, dilution of N share will be very much less and value of N will be preserved.

Now, most of the minors sold their W at very low prices and ran off from the seen.
Big people got additional one and half years to collect money. Some others got the unexpected chance to collect W at near zero cost price. Usually they have projected cash flows from other sources. During this time they can also put N to a better position.

Mekath GREG thawath sellamak da danne naha.

Though I cannot agree with your last sentence, I am with you about the thinking. People who bought it today at 1.50 are clear winners. Though the W2 is not tradable after tomorrow, their cost of the W2 is 1.50 and it will be shown in their portfolios till the conversion taking place, without any erosion. Only this is it's only a virtual value, which they cannot withdraw. They will have about 18 months to pay for the conversion. But who created this biased situation?

WAS THE REGULATOR DONE THEIR DUTY?

Warrants can be either "In the money" or "Out of the money" at the exercise date. But, if all companies which have issued warrants to public start to extend the exercise date when they find out that warrants are out of money.... then what is the point? This will lead warrants/share options to lose its basic characteristics.

I guess the minority ordinary shareholders and the holders of Warrants 2014 and Warrants 2015 have a point to take this matter to some commercial courts (If I'm not wrong.. some legal experts will know).

P.S. I'm not affected by GREG's saga

greedy:
P.S. I'm not affected by GREG's saga

We know that :-)

Dear all,
Pls let us know will there be any change in the future about this issue - May be some connected parties taking legal action ?
Will it Trade again ?
If not why People are collecting it ?

Experts your comments ?

greedy wrote:Warrants can be either "In the money" or "Out of the money" at the exercise date. But, if all companies which have issued warrants to public start to extend the exercise date when they find out that warrants are out of money.... then what is the point? This will lead warrants/share options to lose its basic characteristics.

I guess the minority ordinary shareholders and the holders of Warrants 2014 and Warrants 2015 have a point to take this matter to some commercial courts (If I'm not wrong.. some legal experts will know).

P.S. I'm not affected by GREG's saga

I am also not in favor of extensions. But at the moment all the warrants in the market are "Out of Money". These extensions started with W1, and if it's not allowable, SEC should have taken it as a policy decision or as a rule, which will effective for future warrant issues. But at the moment directors can recommend to shareholders and warrant holders to extend the life of warrants. If shareholders and warrant holders can approve it by passing a resolution in an EGM, under current regulations it's valid they do have every right to do so.

I am sure GREG may have the same destiny of VANIK, it's debentures and warrants. Only time will tell us!!!!

sanjaya351 wrote:Dear all,
Pls let us know will there be any change in the future about this issue - May be some connected parties taking legal action ?
Will it Trade again ?
If not why People are collecting it ?

Experts your comments ?

It's really interesting if someone goes to courts. In Sri Lanka the problem is so far no one challenged the blunders, either by the companies or regulators. In this case, all set of events were questionable. (Please refer my earlier comment.) I think people should come forward and challenge these decisions. Otherwise the confidence in the market will be lost. Look at last twelve months. All of a sudden SEC decided to restrict credit. Some investors got affected as they sold or forced to sell. But couple of months later they relax the rules. Who is responsible for the damage? Shouldn't we really worry about the consistency of the regulator?

Some commissioners publicly said, market is overvalued. But the same people promoted the market in rural areas, and put all the innocent people in trouble. If they are thinking the market is overvalued, why they promoted it to the less savvy people?

hariesha wrote:

sanjaya351 wrote:Dear all,
Pls let us know will there be any change in the future about this issue - May be some connected parties taking legal action ?
Will it Trade again ?
If not why People are collecting it ?

Experts your comments ?

It's really interesting if someone goes to courts. In Sri Lanka the problem is so far no one challenged the blunders, either by the companies or regulators. In this case, all set of events were questionable. (Please refer my earlier comment.) I think people should come forward and challenge these decisions. Otherwise the confidence in the market will be lost. Look at last twelve months. All of a sudden SEC decided to restrict credit. Some investors got affected as they sold or forced to sell. But couple of months later they relax the rules. Who is responsible for the damage? Shouldn't we really worry about the consistency of the regulator?

Some commissioners publicly said, market is overvalued. But the same people promoted the market in rural areas, and put all the innocent people in trouble. If they are thinking the market is overvalued, why they promoted it to the less savvy people?

Unfortunately, our domestic people are afraid to talk against these by keeping their backbones straight. There are several reasons also. 'white-van fear' is one. Other is the accommodation of abundance is needed to work against them along. One person cannot involve full case lonely and it is impossible. We cannot see a such trend in Sri Lanka even in politics also. One starts something such as a court case but nothing to heard after 2-3 weeks. Although status of our motherland is like this, the normal situation in countries like UK, US is totally inside out of ours.

hariesha wrote:

greedy wrote:Warrants can be either "In the money" or "Out of the money" at the exercise date. But, if all companies which have issued warrants to public start to extend the exercise date when they find out that warrants are out of money.... then what is the point? This will lead warrants/share options to lose its basic characteristics.

I guess the minority ordinary shareholders and the holders of Warrants 2014 and Warrants 2015 have a point to take this matter to some commercial courts (If I'm not wrong.. some legal experts will know).

P.S. I'm not affected by GREG's saga

I am also not in favor of extensions. But at the moment all the warrants in the market are "Out of Money". These extensions started with W1, and if it's not allowable, SEC should have taken it as a policy decision or as a rule, which will effective for future warrant issues. But at the moment directors can recommend to shareholders and warrant holders to extend the life of warrants. If shareholders and warrant holders can approve it by passing a resolution in an EGM, under current regulations it's valid they do have every right to do so.

Major shareholders of a Company can pass any sort of resolutions at a EGM/AGM. In this case too, GREG has passed a resolution as Lionhart holds more than 90% of the voting rights. However, there is protection for the minority shareholders under the Companies Act... called "Minority Protection" I guess this is still available in the new companies Act. I'm not a legal expert so I may be wrong in this case.

Quibit wrote:I am sure GREG may have the same destiny of VANIK, it's debentures and warrants. Only time will tell us!!!!

.
I may further add something ,
Lionheart may exit even at very low levels .may be their cost is less than Rs 10 .
Ultimately our retailers will hold till it gets wind up.
Not to get panic ,but to think further .........

soileconomy wrote:

Quibit wrote:I am sure GREG may have the same destiny of VANIK, it's debentures and warrants. Only time will tell us!!!!

.
I may further add something ,
Lionheart may exit even at very low levels .may be their cost is less than Rs 10 .
Ultimately our retailers will hold till it gets wind up.
Not to get panic ,but to think further .........

This is the best thing that can happen to GREG. If LIONHEAR decided to exit from GREG, it will be a PR boost for the share. For them to exit somebody has to buy. ISN'T IT BEING A SILVER LINE? I am sensing it now. May happen.

Quibit wrote:I am sure GREG may have the same destiny of VANIK, it's debentures and warrants. Only time will tell us!!!!

is it going to happen