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Has Noble Group Limited Breached The Minimum Trading Price Rule?

Earlier this month, Noble Group Limited  (SGX: N21) had proposed a rights issue on the basis of one rights share for every ordinary share of the company. The rights shares have an issue price of S$0.11 each.

The company’s shares closed at a price of S$0.30 apiece just prior to the announcement, giving the firm’s shares a theoretical ex-rights price of S$0.21 a pop.

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Today happens to be Noble Group’s ex-rights date – but instead, the company’s shares are trading at a price of S$0.177 at the time of writing. This lower than expected share price may be a problem for Noble Group.

A minimum trading price (MTP) rule was put in place for Mainboard-listed companies in Singapore’s stock market back in March 2015. The MTP rule states that Mainboard companies need to maintain a share price of S$0.20 or more. When the MTP rule was first implemented, there was a 12 month transition period which has already lapsed.

So, if Noble Group’s share price is to remain below S$0.20 for an extended period of time, the company might run afoul of the MTP rule. In such an event, the company may have to consider a consolidation of its shares or a listing on the Catalist board, which has no MTP requirements.

What has happened to Noble Group since the start of 2015 have been both tragic and startling.

The company is a former Straits Times Index (SGX: ^STI) constituent – in other words, a blue chip stock – that has fallen from grace. Besides being booted out of the Straits Times Index, Noble Group has also been forced to sell its assets to shore up its balance sheet. And I’ve not even brought up the company’s aforementioned rights issue yet.

Noble Group’s woes were mostly trigged by a series of post made by a little-known blogger that started on February 2015. The blogger’s posts had criticised many aspects of Noble Group, including its accounting practices.

This symbolises the change of times and how no corporation is safe from criticism, however small the critic may be. Even an insignificant blogger may have the influence to bring a blue chip company down to a penny stock – that’s especially so if the company in question has not been open and transparent with investors and the public.

What public-listed companies can do to avoid such a risk is to be as transparent as they can be in their communications to all investors regardless of the size of the wallet of the investor.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.