Danish IPO Scandal ‘Poison’ for Market, Nasdaq Official SaysPeter Levring
As investors in OW Bunker A/S woke up to a string of horrors yesterday, the exchange on which the company was traded is still trying to assess the damage.
“Surprises like this are poison to the stock market, and this is one of the big surprises,” Carsten Borring, head of listings and capital markets at Nasdaq OMX in Copenhagen, said in a phone interview. “This really isn’t good.”
OW Bunker, which provides fuel to the marine industry, said on Wednesday shortly before midnight that it had lost $275 million through a combination of fraud committed by senior executives at its Singapore office and poor risk management. Its shares have been suspended since Nov. 5 and the company says its equity has been wiped out. Just eight months ago, investors drove OW Bunker’s shares up 21 percent in their first day of trading, following an initial public offering that valued it at almost $1 billion.
“There’s no doubt this case is damaging to investors and the stock market,” Borring said. “The stock market depends deeply on the relationship of trust between investors and companies.”
According to Niels Henrik Jensen, chairman of OW Bunker, the Singapore employee behind the alleged fraud “turned up at the company’s office and told his manager” what he’d done. Jensen declined to provide more details.
“I can’t speculate on how long this has been going on, I didn’t speak to the man myself,” he said. “We’re still not sure whether this was actually illegal -- that’s being investigated.”
Police in Denmark are still trying to establish the jurisdiction of the case and whether fraud was actually committed, Inspector Michael Kjeldgaard said today by phone. His office isn’t aware of any case having been filed with police in Singapore, he said.
Jensen said the board is now looking for fresh capital to keep the company afloat. Its banks have already refused to provide more cash, according to a statement yesterday.
The scandal comes as Europe’s IPO market shows clear signs of cooling down with investors balking at some of the share slumps that have followed recent listings. The hyperbole that characterized the IPO market at the beginning of the year is now giving way to tougher times, according to Harry Klagsbrun, a partner at EQT Partners AB, the largest Nordic buyout fund.
Yet for OW Bunker, the story is a simple case of unforeseeable corruption more than a reflection of any market trend, according to Borring.
The company said it lost $125 million through the alleged fraud at its Singapore office. Separate from that, it said it also lost $150 million following a “significant risk management loss” and has as a result fired its head of risk management, Jane Dahl Christensen.
The banks who helped bring OW Bunker to market all say they’re as shocked as anyone else by its revelations over the past two days. Its shares, which have been suspended since Nov. 5, had lost 42 percent since the March IPO before trading was halted.
“The advisers and the people around the company may have some issues to answer,” Borring said. For now, Nasdaq still doesn’t think it would be “responsible” to allow OW Bunker’s shares to resume trading, he said. “We’ll have to wait for the next statement from the company” and then “review what to do next.”
Nordea Bank AB, which helped arrange the sale and had been urging clients to buy OW Bunker shares since Oct. 24 until suspending its recommendation yesterday, says it’s “shocked” by the company’s subsequent collapse.
“No one can foresee fraudulent activity by individuals,” Stephan Ghisler-Solvang, the bank’s spokesman in Copenhagen, said in a phone interview. “No one could foresee that the company would incur losses of this magnitude after the IPO.”
He says the bank, Scandinavia’s largest, is now awaiting further updates from OW Bunker. Nordea was a bookrunner on the IPO, together with global co-leads Carnegie Investment Bank and Morgan Stanley.
Altor Equity Partners, a private equity fund that had owned OW Bunker since 2007 until its IPO, said it is “deeply disturbed” by the revelations of fraud.
“This situation has snowballed over an extremely short period of time,” Soeren Johansen, a partner at Altor and a member of OW Bunker’s board, said in a statement. “Since being informed of the situation, the board has done all it can to try to protect what was, before the breaches mentioned in the company’s release, a very sound business.”
At Carnegie, which is 68 percent owned by Altor, the view is that the bank is “just as much a spectator to this as anyone else,” spokesman Rickard Buch said. Carnegie is “just as surprised as anyone else,” he said.
“It’s not the first time something like this has happened,” Borring said. “Investors will look very carefully next time around.”
OW Bunker’s March IPO gave the company a value of 5.33 billion kroner ($900 million), making it Denmark’s largest IPO after cleaning services provider ISS A/S, which went public in February in a 21.9 billion-krone listing.
“There’s no doubt this case is damaging to investors and the stock market,” Borring said.
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