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September 20, 2017

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Infodisk Technology likely to be downgraded

Infodisk Technology may be downgraded as a full-delivery stock as soon as next Thursday if it can't present sufficient documents to the Taiwan Stock Exchange (TSE) to clarify its financial reports on Monday. The company is expected to encounter the same financial problems as Procomp Informatics, with its share price dropping to the daily limit of NT$3.97.

Infodisk, which once topped other Taiwan share prices, has suffered worsening financial conditions for more than three years and there appeared more than NT$10 billion in doubtful transactions stated in its financial reports. Prosecutors had started investing the company's financial operations yesterday.

The company is reported to have invested NT$2.62 billion in the Gold Target Fund as Procomp Informatics did, but both failed to clarify where the funds had been. Infodisk may not be able to provide sufficient financial documents as the TSE required as both its Chairman Lu Hsieh-jen and President Tien Cheng-wen have tendered resignations and its chief financial officer has left for the U.S.

In 2001, Lu made a mistake in trying to win orders from MGM by investing up to NT$4.2 billion in the U.S.-based Mediacopy company, but he failed. Then, he used as much as NT$2.62 billion to acquire the Gold Target Fund, making the company's liquid liability far higher than its liquid assets. Lu said he could not unveil the details for his company's investments on the Gold Target Fund because he had signed a secrecy agreement with the company.

While the company's operations have been worsening since three years ago, Lu's shareholding has decreased from 17 percent in 2001 to the current 6.14 percent. Meanwhile, the percentage of his stocks pledged with banks for bank loans kept growing from the 35 percent three years ago to a current 78.76 percent. The rest accounts for only 1.31 percent of the company's outstanding shares.

When listed on the over-the-counter market, Infodisk's share price once soared to NT$512 per share, becoming the king of the stocks on the OTC market. Since it has upgraded to the TSE in September, 2001, its share price has gradually dropped and finally fell to record low of NT$3.97 yesterday.

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