Bankruptcy of Tat Seng executive chairman

Wayyy overdue post which I drafted but did not finish writing at the time of occurrence as I was occupied with work but still worth sharing!

As you may or may not know, I hold a portion in Tat Seng Packaging Group (T12) as part of my income portfolio. Thus, I was suitably alarmed when SGX first reported the bankruptcy of Allen Yap in Sep 2020, the executive chairman of Tat Seng and Hanwell Holdings (investment holding company, parent of Tat Seng). I immediately went to check on its share price to see if it took a hit from the bad news. To my surprise, there was hardly any price movement.

Two reasons I can think of as to why there was barely any impact:

  • Although Tat Seng has been listed on the mainboard since 2001 (wow almost 20 years ago!), it is a small cap company with a low profile. It does not get much media attention relative to a more well-known company or personality (eg. ex-CAG chairman saga ahem) so any news related to the company is inconsequential to most people.
  • Due to it being unknown to most investors, there is low trading volume and liquidity. As a result, even if you reacted to the news and wanted to sell your shares, you can’t.

To be frank I find it hard to believe that Hanwell board “did not know about the bankruptcy until told by the SGX” and that “Mr Yap did not update the company on his status because of an oversight, as he was “extremely busy, engaged on his other personal commitments”.” He was declared bankrupt in HK only but not other jurisdiction which may be why they felt no need to inform board in a timely manner. But I suppose there are circumstances that were not revealed and as small fry retail investors we would be the last to know and understand and I am not here to dispute this anyway (or the fact that his wife also hold a stake in the company and is part of its senior management kept mum about it).

Markets are a reflection of public sentiment, not the actual value of the company, so for Tat Seng it is not that the stock is immune to negative news, it is simply too small a stone to cause any ripples in the ocean.

On one hand this unintended lack of volatility puts my mind at ease and keeps my emotions in check. On the other hand, it is an unnerving reminder of the asymmetrical and imperfect information flow in the market which means retail investors will never have the insider advantage that professional fund managers or institutional investors have.

That being said, which a small portfolio like mine, I still refuse to let fund managers take my money which I otherwise can manage on my own. In fact, this incident reinforces the importance of doing our due diligence and the need to monitor our portfolio (not just buy, hold, and forget) and the news to make up for the lack of expertise and information and ensure that our portfolios remain relevant and aligned to our investing objectives.

I will be more careful and vigilant with this stock moving forward but for now I am well-vested and enjoying the half yearly dividends I receive from Mr and Mrs Allen Yap!

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