GIBC scandal shows backdoor listing issue: analysts
The China Post news staffTAIPEI, Taiwan -- An insider trading scandal implicating major shareholders of Genome International Biomedical Co. (GIBC) has highlighted problems with backdoor listing, market observers said yesterday.
October 7, 2013, 12:06 am TWN
GIBC's share price has plunged below NT$70 from its highest of NT$212 recorded earlier this year when its subsidiary, Top Pot Bakery chain, was still a fast-expanding business before being embroiled in a false advertising scandal.
GIBC's current stock price is still substantially higher than that of the shell that the biomedical firm took over for backdoor listing purposes a few years ago.
The shell was originally an electronics company listed on the over-the-counter (OTC) market. It was later suspended after failing to report its finances. Then another firm seeking backdoor listing bought it and turned it into an IC design company.
In 2010, the IC design firm, whose share prices had hit as low as NT$1.9, was again acquired by Hsu Hsun-ping, who renamed it GIBC and rebranded it as a biomedical firm.
GIBC had been rather unknown to the public until it bought Top Pot Bakery. The bakery chain's strong performance, as well as TV celebrity Dee Hsu's public endorsement, sent the parent company's stock prices soaring. Dee Hsu's husband, Mike Hsu, is a major shareholder of GIBC.
Hsu Hsun-ping and Mike Hsu, as well as two others, are now suspects in an insider trading probe for selling off GIBC shares before the Top Pot scandal erupted.
Market observers noted that stock market regulators had issued warnings 21 times concerning GIBC shares, but its prices continued skyrocketing.
The observers said some investors look to bypass the listing rules through backdoor listing, but they still have the good intention of running a normal business.
But there are also others who merely want to make undue profits from the shell company by manipulating the market, the observers said.
Stock market regulators said investors seeking backdoor listing will usually choose underperforming companies, take them over and restructure them. They said they usually keep a close watch of such companies.
In Taiwan, backdoor listing will usually require an investment of at least NT$250 million to NT$300 million for a company on the OTC market, and NT$300 million to NT$400 million for one on the main board, according to the United Evening News.
The paper said stock exchange rules need to be revised to better monitor the operations of backdoor-listed firms.