Case on GEM

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Case on GEM

• Professor Stephen Cheung
• Department of Economics and Finance
• City University of Hong Kong

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When the South China Morning Post visited AKuP's
(8179) Wan Chai office last night, piles of
unopened letters, magazines and newspapers - some
dating to January 15 - were stacked up at its
entrance. A worker at a neighbouring office said
AKuP's premises had been closed for two
weeks. The company's last price-movement
disclaimer was issued from Nanjing on January 12
by executive director Chu Han-ping. On January
13, AKuP's company secretary and qualified
accountant, Willy Pau Wai-lun, resigned. His
responsibilities were assumed by Mr Chu, who
resigned a day later.
Sources South China Morning Post
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AKuP was one of the worst performing stocks last
year, with its share price dropping almost 85 per
cent. It closed at 1.3 cents on Wednesday before
being suspended. Management and staff at the
company could not be contacted yesterday, and its
website has been disconnected. Bad news has
become a regular feature of the company since its
debut. On its first day of trading, chief
operating officer Edward Huang had to allay
investor concerns about AKuP's high level of
doubtful receivables.
Sources South China Morning Post
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AKuP recorded a 2.45 million net profit in
2001 - its only profitable year since listing.
Three of its five executive directors have
resigned since July last year, each citing
personal reasons. The company reported an
unaudited net loss of 11.6 million for the first
nine months of last year. Questions have been
raised over the speed of the stock exchange's
suspension of AKuP International Holding as it
emerged the regulator may have suspected for
weeks that the Growth Enterprise Market-listed
company was devoid of management.
Sources South China Morning Post
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By January 12, AKuP had no authorised
representative. This is a breach of listing
rules, under which it must retain a qualified
accountant, company secretary and two authorised
representatives. At least 50 companies have
changed auditors since August 2002, representing
26.59 per cent of the 188 companies listed on the
GEM. There is a sense that auditors frequently
use this reason as an excuse to remove themselves
from an account with which they feel
uncomfortable.
Sources South China Morning Post
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"A change of auditors is a very dangerous signal.
It's a warning signal," said Professor Stephen
Cheung Yan-leung, chair of finance at City
University's economics and finance department.
"The auditors may know something but want to
get out. Its auditor's resignation in January
was quickly followed by a spate of executive
resignations which left the company
directorless.
Sources South China Morning Post
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Fact

• Listed price 0.28 in 2001
• Market price 0.013 in 2004
• Turnover at 3/2 150,000 shares
• Turnover at 4/2 60,000,000 shares
• ?increased by 400 times