“The Coco ‘Rights Issue’ is very unfair, unreasonable and oppressive to existing Independent Minority Shareholders (IMS), while unjustly enriching Controlling Interests (CI) and multilinked Related Parties (RP), who themselves have created much ‘shareholder fatigue’, he said in a letter.
This is because the total dividend payout for the last five years by the company has been only Rs. 3 per share out of Rs. 30 net Profit after Tax (PAT) per share; the issue price of Rs. 35 (voting), which on the average dividend basis, amount to about 35 to 55 of years dividend payout; the additional capital was sought to be raised in a mere six weeks; is more than 100 per cent of the value of the shareholder’s present holdings; and is impossible for most IMS to subscribe fully.
“The existing IMS, who could not take up part or all of the ‘Rights’ suffered tremendous loss of retained earnings and reserves (more than 10 times the dividends earned over last 5 years),” he added.
He said if the rights issue was allowed to be completed in its present “atrocious form”, the IMS should be compensated pro rata by the CI and directors of the company.
Mr Vignarajah said the SEC and the CSE should ensure this, while preventing such occurrences in the future, “if the IMS are expected to take very expensive legal action, while the CI will use part of IMS funds to fight the IMS.”