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The Company dumps large amount of goods to one single trading party and encounters financial crisis due to overdue loans

【Background】:
1. The Company, which used to be a traditional home appliance supplier, has diversified its core business into liguid crystal TV production through reinvestment on one US-based distributor in 2003. It has since maintained steady growth in its liguid crystal TV sales thanks to the advantages of its low-price marketing strategies and distribution network in the U.S.
2. A weekly, in its June 2008 issue, reported the hidden financial risk of the Company and disclosed the abnormally continuous price fall of the Company’s second domestic non-collaterized convertible bond. Meanwhile, the Company-reinvested American distributor encountered serious financial problem as its book value dramatically dropped to only NT$1.4 billion at the end of the first quarter of 2008 from the NT$14.2 billion in the beginning of 2007. If the American affiliate went de-listing on penalty, it would result in a huge loss of the Company. Furthermore, the American affiliate held huge amount of account payables for the Company and accounted for over 60% of the Company’s annual revenue in 2007. Its financial problem explored the hidden financial risks of the Company. Since then, the Center from time to time received investors’ complains about the abnormal price falling of the Company’s non-collaterized convertible bond.
3. The Company changed its certified accountant in July 2008 and then published significant company news that its US-based distributor applied to the court for restructure. The Company, however, failed to clarify some doubtful points about this issue. Its stock was later classified into the full-delivery category and has thus continuously dropped to the daily limit on the following over ten consecutive trading days. The Company finally saw its checks bounced at the end of July.
【Reactive reactions】:
1. The Center, before the Company convened its annual shareholders’ meeting for 2008, has noticed the abnormal price fall of the Company’s common shares and convertible bonds (CBs). The Center has thus gathered related information and wrote to the Company to request it to give details about the following issues during its shareholders’ meeting: the Company’s plan for dealing with CB investors’ redemption request, current status of the Company reinvested American affiliate, the possibility for the American distributor to go de-listing as well as its influence and the Company’s reaction plan for it, the feasibility for the Company to collect account payables from the American subsidiary, the Company’s plans for acquiring collaterals and collecting debt repayments. The Center also sent copies of the request letters to the regulatory agencies.
2. The Center dispatched representatives to attend the Company’s annual shareholders’ meeting held in June 2007, during which the representatives asked the Company to give details about its CB repayment plan, reinvestment, and financial reports and required the company to make records of all its answers to these questions in the meeting proceedings. Meanwhile, the Center also expressed some questionable points about the Company’s 2007 operation and financial reports.
3. The regulatory agencies, after receiving copies of the Center’s request letter to the Company, has been proceeding exceptional management and made on-the-spot inspection of the Company, and required the Company to keep publishing significant company news at press conferences. Because the Company failed to clarify some major questionable points, the Taiwan Stock Exchange (TWSE) finally altered the transaction means of the Company’s shares.
【Follow-ups】:
1. The Center wrote letters to the Company to request it to explain the discrepancy between its account receivables and its American affiliate’s account payables, the usual loan repayment collection schedule, and the feasibility for collecting the Company’s receivables, with copies sent to related regulatory agencies.
2. The Center keeps a close eye on the Company’s current operations. If there is any illegal situation, the Center will consider filing class-action litigation to protect investors’ interest.  

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Update Date:2015/12/27 12:54