IN a nutshell, an employee share option scheme (ESOS) is an incentive scheme whereby employees are offered an option to purchase shares of their companies at a certain price either over a specified period of time or upon specified milestones.
ESOS is a means of compensating employees – a platform to motivate, retain and remunerate talents – by allowing them to participate in the growth of the company’s equity.
The ESOS mooted by BCM Alliance Bhd has raised public interest. While ESOS is typically offered to all employees, only two employees ended up taking the offered ESOS.
It is puzzling as to why other staff did not take up the ESOS if they were offered given the ESOS was at a significant discount to the market price.
The exercise price of options offered was 2.91 sen while the closing market price of the company’s shares on the date of offer was 3.5 sen.
Subsequently, the two employees emerged as the major shareholders of the company. Overnight, new major shareholders had emerged.
What happened?
According to BCM Alliance’s filings with Bursa Malaysia dated Jan 20, two employees namely Kiu Cu Seng and Cheng Li Ping exercised a total of 469.41 million shares (the total ESOS shares that was offered under the scheme) at 2.91 sen apiece.
Kiu exercised some 305.12 million shares or equivalent to a 15% stake, making him the largest shareholder of BCM Alliance, followed by Cheng who exercised 164.29 million shares for an 8.08% stake.
This has effectively made the duo the largest shareholders of BCM Alliance with a combined 23% stake after exercising their ESOS.
A check on the website Boardroom Alpha shows that Kiu, 33, has since March 2021 served as group accountant for BCM Alliance, Sanichi Technology Bhd and Trive Property Group Bhd. His responsibility is said to centre on group consolidation matters.
Additionally, his name also appeared as the chief financial officer of Nasdaq-listed shell company Energem Corp. Energem was listed on Nov 16, 2021 with an initial public offering price of US$10 per unit for 10 million units.
There is hardly any information available with regards to Cheng.
For its 3Q FY2021 ended Sept 30, 2021, BCM Alliance returned to the black with a net profit of RM1.51 mil against a net loss of RM5.33 mil in the preceding quarter. Year-on-year, its net profit jumped 21.77% from RM1.24 mil in the previous year’s corresponding quarter.
Quarterly revenue, however, fell 17% to RM16.97 mil from RM20.39 mil a year earlier.
For the cumulative nine months ended Sept 30, 2021, BCM Alliance had incurred a net loss of RM3.79 mil compared to a net profit of RM2.32 mil in the previous corresponding period while revenue fell 5% to RM49.71 mil from RM52.5 mil.
Over the last 14 months, BCM Alliance had issued 1.08 billion new shares via rights issues and private placement to raise funds.
Presently, it has a total share base of about two billion shares, up three-fold from 625.88 million shares as of March 31, 2021. At the same time, the share price of BCM Alliance has been on a downward spiral from a 52-week high of 32.5 sen to the current price of 3.5 sen as of Feb 17.
Further probing
To re-cap, BCM Alliance proposed in February 2021 to terminate a five-year ESOS scheme which was established on Aug 25, 2020. The previous ESOS constituted the issuance of up to 15% of the company’s issued share capital to eligible directors and employees.
Shortly after, BCM Alliance came out with a new five-year ESOS proposal involving up to 30% of the total number of its issued shares for eligible directors and employees of the company and its subsidiaries.
BCM Alliance said the ESOS exercise is also intended to retain the eligible individuals by giving them a sense of ownership, loyalty and belonging to the group by enabling them to participate via equity ownership in the company.
It further noted that any proceeds from its ESOS will be utilised for the company’s working capital purposes.
The exercise price of ESOS offered to employees was 2.91 sen per share, representing circa 17% discount to BCM Alliance’s closing price of 3.5 sen on Jan 12 when the offer was made.
Given the ESOS was offered at a discount to share price, it is strange to find that none of the other employees took up the offered shares.
Indeed Kiu and Cheng must be wealthy for they were able to fork out RM13.66 mil (a massive amount for the man-on-the-street) to exercise the 469.41 million ESOS shares.
Shareholders should seek explanation on the puzzling offer of ESOS at BCM Alliance’s forthcoming general meeting.
Devanesan Evanson is CEO of the Minority Shareholders Watch Group.
The views expressed are solely of the author and do not necessarily reflect those of Focus Malaysia.
