XPEC shares extend losses after tender offer falls apart

Shares of gaming software developer XPEC Entertainment Inc. (????) extended losses Thursday morning from a session earlier to suffer another plunge after a tender offer deal, in which a Japanese firm was to acquire a stake in the Taiwanese firm, fell apart, dealers said.

A plan for XPEC to buy back its own shares from the open market failed to restore investor confidence in the stock after Japan-based Bai Chi Gan Tou Digital Entertainment Co (????) withdrew its tender offer Tuesday, they said.

The Financial Supervisory Commission (FSC), the top financial regulator in Taiwan, is planning to push for a deposit mechanism that would guarantee the honoring of tender offers in a bid to prevent such a default from happening again and eventually protect investors.

As of 11:09 a.m., shares of XPEC had fallen 10 percent, the maximum daily decline, to NT$63.2 (US$1.99) with 957,000 shares changing hands on the local over-the-counter market, where the index was down 0.21 percent at 130.16 points.

The stock faced tremendous selling soon after the local equity market opened Thursday after a 10 percent dive seen Wednesday, and selling continued to keep the stock trading at a price which was its lowest level in almost four years, dealers said.

After the 10 percent plunge seen in the Thursday morning session, there still had been orders placed by investors to dump additional 18.7 million XPEC shares, indicating that the stock will spend some time to digest further downward pressure down the road, they said.

In late May, Bai Chi Gan Tou announced it would acquire 38 million XPEC shares or 25.17 percent at NT$128, saying the Japanese firm was upbeat about the Taiwanese firm's prospects. The potential suitor vowed not to intervene in the game developer's management after the tender offer, but would simply serve as a pure investor. The acquisition had previously 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. But, it turned out that the potential Japanese suitor withdrew its tender offer on Tuesday, sending XPEC shares into a tailspin.

XPEC Chairman Aaron Hsu (???) said in an open letter to shareholders on Wednesday that his company has been considering a plan to buy back its own shares from the open market in a bid to strengthen shareholders' faith in the company and keep the stock from dropping further. But, investors continued to dump XPEC shares Thursday morning since the market has doubts that the company will have sufficient cash for the share buyback.

Hsu said that his company will sue Bai Chi Gan Tou for compensation after its default on the tender offer.

FSC Chairman Ding Kung-wha (???) said Wednesday that his commission will come up with measures by the end of September to set up a deposit mechanism which is expected to facilitate the implementation of a tender offer by a potential suitor. Ding said that such a mechanism is expected to prevent another XPEC-like case and protect investors.

The FSC said that it will provide investors with the necessary assistance to seek compensation from the Japanese firm and launch an investigation into the deal to find out whether the tender offer has violated any local securities regulations.

Source: Focus Taiwan News Channel