Asus launches internal probe into alleged market manipulation
By Ted Chen, The China Post
July 17, 2014, 12:01 am TWN
TAIPEI, Taiwan -- ASUSTek Computer Inc. (華碩) Chairman Jonney Shih (施崇棠) yesterday launched an internal probe to investigate suspected market manipulation of the company's IC design subsidiary ASMedia Technology Inc. (祥碩).
Reports indicate that the management team at ASMedia are suspected of manipulating the company's share price, reaping profits of exceeding NT$10 million, while causing compounded losses for highly leveraged short selling for a number of investors, who claimed to have fallen victim to misleading information.
A report by Next Magazine (壹週刊) suggested that ASMedia managers had spread rumors that its shares were ripe for short selling, as its price-to-earnings ratios were deemed precariously high. ASMedia managers then proceeded to spread contrary misinformation boasting that the company's performance is poised to see explosive growth, and yield earnings-per-share of NT$5 this year, and NT$10 in the following year, said the magazine report.
As a result, a number of investors who had placed short sell orders on ASMedia shares were impaled by sharp spikes in the company's share price. Propelled by the subsequent release of the firm's stellar performance prospects, ASMedia shares surged by 329 percent from NT$53.2 over the course of the past three months, and at its height reached NT$228.5 earlier this month. Investors involved have since claimed that they were devastated with mounting losses, with many losing their life savings.
Asus Subsidiary Crashes after Hot Three-Month Streak
On July 17 ASMedia shares began tumbling markedly, and yesterday lost 7 percent or NT$12 to close at NT$166. Influenced by troubles at its subsidiary Asus shares yesterday posted modest gains of NT$0.5 or 0.15 percent to close at NT$327.5.
Most notably, one of the investors involved claimed that ASMedia had declined to verify or comment on rumors of its stellar earnings forecast, and had only offered a denial of the rumors after its shares had risen dramatically, which was deemed to be an act of market manipulation, according to the magazine report. The investor also claimed that following a period without response from the company, a complaint letter was sent directly to the inbox of Shih.
Meanwhile, ASMedia President Lin Zer-wei (林哲緯) yesterday rejected claims of the company's management in the market manipulation incident. Lin stated that the Taiwan Stock Exchange's Market Observation System is the company's only channel of information release, while denying claims that its managers had colluded with cable TV investment advisers in misleading the public.
Subsidiary President Denies All Allegations
According to Lin, it is unlikely that the management team has the leisure to conduct market manipulation in addition to their duties in overseeing the company's operations, adding that the firm does not have control of the more speculative forces of the market. Lin also doubted the creditability of the report, stating that allegations are backed up by no more than the account of bearish speculators dispatched through an email address.
ASMedia most recently reported its operating results for June on Tuesday, recording after-tax earnings-per-share performance of NT$0.32 for the month, and NT$1.21 for the second quarter, up by 120 percent quarter-on-quarter.