Don’t assume shareholders are fools

THERE are indeed fortunes to be made from the COVID-19 vaccine trade yet companies intending to become ‘vaccine raiders’ better beware.

With the advent of mobile technology where stock trading knowledge or stock-related information can be easily disseminated, today’s shareholders are a learned lot.

Undermine their intellect and stock promoters (founders or major shareholders for that matter) shall risk paying a hefty price for their misdeed.

To prove this point, shares in pharmaceutical giant AstraZeneca slid 2% on Monday after the company released results that showed its COVID-19 vaccine is just 70.4% effective, compared with rates of above 90% for those of its two biggest rivals, namely Pfizer-BioNTech and Moderna (at 94.5%).

Closer to home, a quick glimpse at the I3 Investor forum saw surprisingly intellectual engagements taking place among investors (both genuine and market manipulators) of Metronic Global Bhd and Kanger International Bhd  which have recently announced positive developments with regard to their vaccine business pursuit.

To re-cap, Metronic announced last Friday (Nov 20) that it stands to rake in in an estimated gross profit of RM120 mil to RM180 mil should the exclusive distribution partnership between its subsidiary and Medigen Vaccine Biologics Corporation (MVC), an international pharmaceutical company listed on the Taiwan Stock Exchange, bear fruit. (Click here for full story)

 Yesterday, Kanger revealed that it has obtained the green light from the relevant authority to communicate with the relevant stakeholders at China National Pharmaceutical Group Corporation (Sinopharm) to purchase COVID-19 vaccines for private sector use in Malaysia.

The company said the National Institutes of Biotechnology Malaysia, an agency under the Ministry of Science, Technology and Innovation Malaysia has issued a letter which states that it has no objection for Kanger to proceed with the negotiation process. (Click here for full story)

But despite such promising market pitches – to borrow the jargon of the public relations industry – investors of both counters debated at length if the claims of both companies can be substantiated or are mere conduit to facilitate works of the pump and dump operators.

At today’s market close, Metronic was down 1 sen or 8.7% at 10.5 sen with a hefty 158.72 million shares exchanged hands (valuing the company at RM131 mil) while Kanger was down 1.5 sen or 7.69% at 18 sen with 237.15 million shares traded (valuing the company at RM371 mil).

The Minority Shareholders Watch Group CEO Devanesan Evanson hailed such development as living up to the shareholder activism agenda that the group is championing. He shares his words of wisdom with FocusM:

As they say, ‘there is many a slip between the cup and the lip’. It is easy for some listed companies to announce intentions and action plans because such announcements are cheap; it does not cost them anything to announce such things.

Whether there will be actualisation of these is another point altogether. Tie-ups and memorandums of understanding are another kettle of fish that may result in nothing.

Sometimes such announcements result in spectacular price increases only for the prices to fall flat later. Some punting-minority shareholders, who like to live dangerously, will invest hoping to ride the upside and get out before the downside kicks in.

Not every minority shareholder can time the company’s share price trajectory so perfectly and mechanically. Many a minority shareholder has lost money because they went in too high and were unable to get out before the often-sudden fall in the share prices.

Some have referred to such dubious announcements as mere noise meant to drive up share prices.

Minority shareholders must form a view on the likelihood of such announcements bearing fruit at the end of the day.

The informed minority shareholder will also consider, among others, the financial strength of the company, its reputation/performance track record and the reputation of the board and major shareholders before parting with their money by investing in such companies.

Minority shareholders must always remember the maxim that ‘if it is too good to be true, it probably is … too good to be true’. – Nov 24, 2020