A Quick Lesson Learned From $FITTERS / 9318 (FITTERS DIVERSIFIED BERHAD) and $CFM / 8044 (COMPUTER FORMS (MALAYSIA) BERHAD) RPTs

A Quick Recap: According to a Bursa Malaysia filing dated March 13, FITTERS acquired 12.14 million shares of CFM, equivalent to approximately 4.54%, on March 7 and 8. Additionally, FITTERS obtained 6.18 million CFM warrants, resulting in a total cash expenditure of RM34.78 million for these shares and warrants. FITTERS justified this move by citing the promising joint venture agreement between CFM and EA, involving the sale, distribution, assembly, and production of electric vehicles (EVs) in Malaysia. However, within a week, from March 14 to 22, FITTERS decided to divest its position in CFM shares and warrants, incurring a loss in the process.

This bad move had destroyed the shareholders interest and let’s listen to Wyncorp’s opinion about this.

The independent adviser to FITTERS' minority shareholders, Wyncorp Advisory Sdn Bhd, recently revealed that FITTERS' acquisition of 4.54% of CFM's shares and 4.78% of CFM's warrants resulted in a loss of RM26.19 million when sold more than a week later. Wyncorp believes this acquisition was not reasonable and was detrimental to FITTERS' non-interested shareholders. FITTERS had initially invested in CFM to benefit from potential gains related to electric vehicles (EVs) in Malaysia, but there has been little progress in CFM's EV plans.

Wyncorp argued that the disposals of CFM shares and warrants prevented further losses for FITTERS due to the sharp decline in CFM's market prices. This rationale, according to Wyncorp, was reasonable and not detrimental to non-interested FITTERS shareholders. The acquisition was considered a related-party transaction by Bursa Malaysia, given the common directors between FITTERS and CFM.

However, questions arise about the initial investment in CFM by FITTERS, especially given the shared directors who should have assessed the feasibility of CFM's EV plans.

Conclusion: This news serves as a reminder of the importance of being vigilant about related-party transactions (RPTs), as some of them can potentially harm the interests of shareholders in favor of serving the interests of majority shareholders.

Source: https://cutt.ly/0wc0tPWj