Prosecutors said Saturday that they are seeking court approval to detain gaming software developer XPEC Entertainment Inc. (????) Chairman Aaron Hsu (???) for his alleged involvement in a botched tender offer of a stake in the company owned by a Japanese suitor, which caused massive losses for investors.
In late May, Bai Chi Gan Tou Digital Entertainment Co (????) announced it would acquire 38 million XPEC shares or 25.17 percent of the company at NT$128 (US$4.08) per share, an almost 22 percent premium over XPEC's share price then, saying the Japanese firm was upbeat about the Taiwanese firm's prospects. The acquisition at that time had been valued at NT$4.86 billion.
The tender offer announcement prompted many retail investors to pick up XPEC shares on expectations that Bai Chi Gan Tou would spend NT$128 per share to buy their XPEC holdings later.
In June, the company's share price surpassed NT$110.
However, speculation emerged from Aug. 19 that Bai Chi Gan Tou would delay the acquisition, which started to push XPEC shares lower. In late August, the Japanese firm requested an extension of the deadline for making a payment on the acquisition, and even worse, on Aug. 30, it announced it had decided to walk away from the deal, resulting in a settlement default. The default led to the company's shares dropping as low as NT$70.20 on the over-the-counter market on Aug. 31.
As many investors sold their shares, those who purchased the stock after the tender offer was first announced suffered significant losses. The failed acquisition resulted in a loss of NT$10 billion in XPEC's market capitalization.
It was the first settlement default in a tender offer in Taiwan's equity market, which caught many investors and market analysts off guard. It prompted prosecutors and the Financial Supervisory Commission, the top financial regulator, to launch investigations into the case.
After questioning Hsu, prosecutors filed an application with a court in Taipei at 6:50 a.m. Saturday for permission to detain the XPEC chairman, accusing him of violating the Securities and Exchange Act.
Prosecutors have also asked the court to bar Hsu from meeting with other people except for his lawyers.
Prosecutors this week also summoned for questioning many others connected to XPEC, including media celebrity and former lawmaker Sisy Chen (???) and former Taipei City Deputy Mayor Lee Yong-ping (???).
Chen, who resigned from the post as an independent director of XPEC after the failed tender offer surfaced, and Lee, who remains an independent director of the company, were released after questioning.
Former Economics Minister Yiin Chii-ming (???), another independent director of XPEC, also had been summoned, but he did not show up since he was out of town . Prosecutors will summon Yiin again after he returns to Taiwan.
In addition to summoning Hsu and other related persons in the case, prosecutors also launched a raid Friday on XPEC's headquarters, Bai Chi Gan Tou's Taipei office, CTBC Bank (???), CTBC Securities (????) and Concord Securities (????), which had been involved in the tender offer.
The local media reported Saturday that after their investigation, prosecutors suspected Chinese funds had been behind the failed tender offer.
Media reports cited prosecutors as saying that Bai Chi Gan Tou could be a paper company, which has business ties with the China gaming market, adding that it was possible that Chinese investors had tried to manipulate the tender offer.
Before the tender offer proposed by Bai Chi Gan Tou, XPEC issued three tranches of convertible bonds worth NT$2 billion in March. The FSC has suspected that the bond sales could involve insider trading and share price manipulation and has reported their suspicions to prosecutors for further investigations.
Source: Focus Taiwan News Channel