ECS Holdings halts trading after publicly-held shares slump below normal

Business will operate as usual.

Failing to restore the free float of shares back to at least 10% could endanger a company by being delisted, and ECS Holdings might consider voluntarily delisting, analysts from OCBC Investment Research say.

ECS Holdings Limited (ECS) announced trading halt on 23-Sep after the number of shares held by the public, as defined by SGX, fell below 10% of total issued shares of ECS.

SGX’s rule allows an issuer a period of three months (or longer under special circumstances) to restore the free float back to at least 10%, failing which, it may be delisted. 

According to OCBC, following the halt, ECS announced on 25-Sep to suspend trading until further notice after its controlling shareholder, VST Holdings Limited (VST), had indicated that they do not intend to undertake or support any action to restore the public float of the company back to above 10%. As there has not been any change in ECS’ directors’ holdings, we believe the reason for the drop in free float is due to purchase of ECS’ shares in the open market by VST.

Here’s more from OCBC:

ECS’ management reassured that there is no change to its fundamentals from last update as business continues to operate as usual and we continue to believe that ECS is poised to grow in enterprise segment as well as its distribution segment in China. 

While fundamentals remain unchanged, with VST’s intention not to support any action to restore public float, we believe delisting seems to be the most probable option. SGX’s rule allows an issuer a period of three months (or longer under special circumstances) to restore the free float back to at least 10%, failing which, it may be delisted.
While we also do not rule out the possibility of placement of shares since this option remains open until any firm decision made by VST, we are more inclined towards the probability of VST making an exit offer to the remaining shareholders.

ECS and VST were unable to provide any additional information but we do understand from VST that discussions are in progress on their final decision. As we lack clarity on the status of VST’s progress in its decision making process, we continue to put our Buy rating and fair value estimate of S$0.68 under review until a further announcement is made.