The Federal Court yesterday upheld decisions made by the Court of Appeal and the High Court in favour of Malaysian Bulk Carriers Bhd (Maybulk)’s right to reject share applications from individuals, despite them being allotted pink forms.
In the landmark decision which will govern all future initial public offerings (IPOs) and the use of pink forms— three individuals, who were attached to shipping finance fund Global Maritime Ventures Bhd (GMV), a unit of Bank Pembangunan Bhd—sought 1.6 million shares in Maybulk as per their allotment via pink forms, prior to the shipping company’s initial public offering in December 2003.
Pink forms are generally viewed as a certainty to getting an allotment of shares—-however in this case, against the norm, Maybulk rejected the application by the three, which resulted in the legal proceedings.
“The question hinged on whether a difference should be drawn between white and pink forms with the latter capable of being an offer….court decided that pink forms are still invitations to treat and there is no guarantee of getting the shares upon IPO.
“It’s finally settled law that pink forms handed out pursuant to IPOs are merely an invitation to treat and hence the company has every right not to accept applications for shares under pink forms,” said Maybulk’s lawyer, Leonard Yeoh a partner at Messrs Tay & Partners.
While the three said that the pink forms issued by Maybulk was an offer, which they had duly accepted, thus forming a valid contract, Maybulk argued that it is the prerogative of the company directors to reject an application of shares—be it for a pink form or a normal white form.
The three individuals were seeking to differentiate the pink form as an enforceable offer as opposed to a white form, a mere application.
News reports have it that the offer of Maybulk pink forms was made to the three in appreciation of their contribution towards the company prior to the floatation of Maybulk’s shares.
However in the go-go 90’s those who received pink forms often sold it as it was viewed as a guaranteed allotment of shares, industry observers said.
Nevertheless the Federal Court confirmed the Court of Appeal’s ruling in November last year and the High Court’s verdict in 2010, that Maybulk had the right to reject share applications, although pink forms had been allotted.
Maybulk IPOed at RM1.19 in December 2003. On Wednesday the company’s stock ended trading at RM1.53, falling from highs of RM4.50 in January 2009, which means the three individuals who pressed charges could have made substantial gains, had they been allotted the 1.16 million shares.
Prior to Maybulk’s listing, GMV— a shipping venture capital fund—- owned 30 percent of the company. The remainder of Maybulk was controlled by tycoon Robert Kuok Hock Nien.
After the floatation exercise, Kuok has about 48 percent of Maybulk while Bank Pembangunan which is controlled by the Minister of Finance Inc has 18.39 percent.