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Shares of Powerchip plunge on fears of delisting

TAIPEI -- Shares of Powerchip Technology Corp., a Taiwan-based dynamic random access memory (DRAM) chip-maker, took a dive yesterday as investors feared the stock will face a delisting after reporting a negative book value in August, dealers said.

Concerns over its bottom line also prompted many investors to dump the stock as the global DRAM sector is still suffering a supply glut which will further squeeze the company's bottom line, they said.

Shares of Powerchip fell 7 percent, the maximum daily decline, to close at NT$0.38 with 1.77 million shares changing hands on the over-the-counter market where the stock is traded.

The OTC market index closed up 0.88 percent at 106.60 points.

Shares of Powerchip encountered heavy downward pressure to drop 7 percent soon after the market opened and sell-off continued until the end of the session, dealers said.

Since there are selling orders on almost 120 million Powerchip shares, it is possible that the stock will have additional declines over the next few sessions, they said.

On Tuesday, loss incurring Powerchip, requested by GreTai Securities Market — the operator of the OTC market, reported its total debt to total assets ratio reached 102 percent at the end of August, indicating its book value plunged into the red.

Under the local securities listing rules, a listed company on the main board or on the OTC market will be forced to be delisted if it reports negative book value in its quarterly financial statement.

As the global DRAM sector is depressed by weakening demand, there have been rising concerns that Powerchip will continue to record heavy losses, dealers said.

The company is likely to fail to cut its total debt to total asset ratio so that it is expected to report a negative book value at the end of the third quarter and a delisting will be forced, they said.

At the end of June, Powerchip's book value per share fell to NT$0.28 from NT$0.86 recorded at the end March after the company reported NT$8.60 billion in net losses in the first half of this year, extending from NT$5.57 billion in net loss registered in the first quarter.

According to DRAMeXchange, the contact DRAM prices for August fell more than 10 percent from July, the steepest monthly decline so far this year.

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