Artroniq’s move to trim private placement size will likely be contested

A SHAREHOLDER tussle could be brewing at Artroniq Bhd following the rejection of a proposed private placement of up to 86.7 million new ordinary shares or not more than 30% of the issued shares in the company to independent third party investors on March 18.

Interestingly, when the placement proposal was made in December 2020, there was no indication of an objection from the major shareholders as well as the board of directors at that time.

The placement was made with an intention to raise gross proceeds of RM30.77 mil for working capital and future viable investment.

Instead, the board of directors has now proposed to undertake another placement of up to 10% or 28.89 million shares at an illustrative issue price of 44 sen about a week after the rejection of the earlier proposal.

The new placement would raise gross proceeds of RM12.8 mil instead of the RM30.77 mil as per the original private placement proposal.

The proposal would have resulted in a dilution of shareholdings for existing shareholders.

“Former group managing director Tee Yen Chong is now looking to file an injunction to stop the proposed private placement,” the sources told FocusM.

Tee first emerged as a substantial shareholder of Artroniq in May 2017 with 10.96% stake. Following his emergence as a substantial shareholder, he was then appointed as the executive director for the group before being re-designated as group managing director in February 2018.

For the record, Tee had stepped down from his role as the company’s managing director in October 2019 following a proposal to remove him in at an extraordinary general meeting (EGM).

Elaborating on the background of the shareholder tussle, the sources said the ordeal started with the acquisition of a 7.99% interest in Artroniq by Choy Eng Lun from Low Kar Yee following the issue and allotment of 21 million shares at 19 sen/share pursuant to a sale and purchase agreement (SPA) dated October 10, 2018 as part satisfaction of the RM8 mil in respect to the acquisition of EA Global Integrated Sdn Bhd.

In this regard, the sources highlighted the possibility that Choy may be a close associate of Heng Kear Huat who is currently Artroniq’s major shareholder with 22.8% direct equity interest.

Currently, Low is the executive director of EA Global while Choy is the executive director of Artroniq. On Jan 3, 2019, Leong Seng Kin was appointed as Artroniq’s group CEO.

“With Low in the picture as of end-October 2018, things started to turn a sour note for Tee,” explained the sources.

“The appointment of Choy and Leong as executive director and the group’s CEO respectively have further weakened Tee’s position which eventually led to his suspension and removal.”

Additionally, the sources also questioned the appropriateness of Leong’s appointment given he has been declared a bankrupt since Aug 8, 2011.

“This surprisingly wasn’t detected by both the market regulators and shareholders,” the sources pointed out.

“What is even more disappointing is that under the management of Choy and Leong, Artroniq’s financial results have seen deteriorated further.”

The company saw its net loss widened to RM11.83 mil for the financial year ended Dec 31, 2020 from RM2.23 mil over the same period in 2019.

“It is reasonable to assume that the group’s losses may be widen further for 2021 due to the impending shareholders tussle,” added the sources.

Previously known as Plastrade Technology Bhd, the ACE Market counter embarked on name change to Artroniq on Nov 4 last year.

The Johor Bahru-based company has since diversified into the distribution and supply of laptops, computer, mobile phones, printers and other related consumables in the information communications technology (ICT) segment from a power cable manufacturer.

At today’s market close, Artroniq was down 4 sen or 7.41% to 50 sen with 8.78 million shares traded, thus valuing the company at RM144 mil. – April 7, 2021

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