Opinion – Thailand’s SEC under scrutiny as listed firm’s executive in spotlight for possibly repeat insider trading

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Thailand’s Securities and Exchange Commission (SEC) has once again become the talk of the town after yet another possible issue of ‘insider’ trading surfaces on one of Thailand’s leading companies.

Reports suggest that a person who has in the past been implicated for Insider Trading has once again dumped shares right before an announcement that wiped out about 56.14 billion Baht of market capitalization of the company in which he was a director.

Korsak Chairasmisak, the vice chairman of CP ALL Plc (CPALL) and also the vice chairman of CP Axtra Plc (CPAXT), reportedly sold 877,100 shares in CPALL on December 3, 2024, at an average price of 62.88 Baht/share. As per the reporting to the Stock Exchange of Thailand (SET) Korsak sold the shares and reported it to the bourse on December 4, 2024 (scroll down to page 16).

Eight working days later an announcement by CPAXT has wiped out just over 153 billion Baht of market capitalization from the 3 listed companies under the Charoen Pokphand Group, Thailand’s largest agricultural conglomerate. The 3rd listed company of CP Group is called Charoen Pokphand Foods Plc (CPF).

Korsak reportedly still holds 5,249,471 shares in CPALL, the operator of 7-Eleven stores across Thailand. There has been no clarifications from Korsak or from CPALL or CPAXT on this issue yet.

Not the 1st time

CP Group’s executives including Korsak had undertaken insider trading just about a decade ago when CP Group was looking to re-purchase the shares of its founding company – Siam Makro Plc which was later renamed as CPAXT.

In April 2013, CP All executives Korsak Chairasmisak, Pittaya Jearavisitkul, and Piyawat Titasattavorakul bought shares in Siam Makro (MAKRO) using inside information. The executives purchased shares through their own trading accounts and through the accounts of others.

Korsak was the chairman of CPALL at the time of the insider trading and the SEC imposed a mere US$ 1 million in fine. Report from Reuters tells the in-depth story on this issue.

Despite these people being fined for breach of rules, most if not all of these ‘insider trading’ board of directors have been back on the board of CPALL as shown in the list of the SET.

It may be too early to say that the action of Krosak was one of insider trading but with the stock trading at nearly 5-years low after the announcement by CPAXT, only a blind SEC would say that such action does not construe to be an insider trading.

CPAXT Fiasco

CPAXT, the company at the center of this entire saga, made a call on December 13 that it would purchase part of the retail asset of Happitat at the Forestias Co, Ltd, a mixed-use real estate development business.

The move by CPAXT to invest 8.4 billion Baht in Happitat, CPAXT said, could be the first step for the company to venture into a property development business.

However, the move was also seen as a bailout for Magnolia Quality Development Corporation (MQDC), an international property development owned by the Chearavanont family. The company is currently developing a mega project named The Forestias, a luxury mixed-use development project. The overall cost of the project is about US$ 4 billion.

MQDC currently has 45,161 million Baht of long-term debenture with maturity date ranging from 2025-28, according to ThaiBMA website, of which 7 debentures at a total amount of 22.5 billion Baht are due in 2025.

Value Destruction

The move by CPAXT to purchase the retail asset of a mere 8.4 billion Baht of Happitat in Bangna area, created a value destruction of more than 153 billion Baht in 2 trading days on the SET.

Shares of all 3 listed companies have seen a decline in price and yesterday (December 17) they continued their southbound trajectory.

Share Price of CPALL on December 17
Share Price of CPF on December 17
Share Price of CPAXT on December 17

A decision by the board to buy into 8.4 billion Baht in assets has destroyed 18x more value of shareholders not because of a bad business decision but it looks more like a lack of confidence in the management and the entire board.

The biggest loser up until yesterday was CPAXT, the buyer of the assets from Happitat which has lost its market capitalization by 83.42 billion Baht to 278.94 billion Baht. CPALL is the 2nd largest loser with 56.14 billion Baht to 505.30 billion Baht and CPF has so far lost 13.46 billion Baht in market capitalization to 188.46 billion Baht.

Toothless SEC Needs to Act

Thailand’s SEC, which is considered to be toothless and hence all the fiascos that are surfacing on the corporate governance issues, needs to be more proactive and impose more than just fines. Thailand’s law can impose fines and up to 2-years of imprisonment, but most cases seldom reach the court of law due to the long time it takes to prosecute those in breach of the law.

The law stipulates that insider traders could be imprisoned for a term not exceeding 2 years and/or a fine not exceeding 2 times the benefit received, or which should have been received but not less than 500,000 Baht.

Reports suggest that out of 47 insider trading cases reported by the SEC from 2009-15, only 8 criminal complaints were filed, while only 2 eventually went to trial. The Criminal Court imposed a fine of 1.25 million Baht in one case and a jail sentence and fine in the other.

Investors are looking for more corporate governance. Companies that want to operate like a ‘family run business’ should not list on the bourse or if they are listed should look to delist.

Corporate governance is paramount to most large-scale investors and using the listed company to being a tool to live a lavish life of owning private jets and company owned mansions across the world should not be encouraged, no matter how successful business operations are.

To achieve the dream of having a strong capital market would also mean making changes to the rule of the game as most world-class fund managers are looking at Corporate Governance, and even small-scale investors are starting to take note of such issues; thus, it is also important for the government in Thailand to look at ways to reform the laws of such issue as insider trading or misappropriation of company funds for executives or owner’s private use.

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