Unnamed Sources Strikes On Mems!

This was the hottest traded stock yesterday. It surged a whopping 42%. And the Business Times tried to shed some light.

• SHARES of MEMS Technology Bhd surged 42 per cent yesterday in active trade on speculation that its accounting problems may soon be resolved, dealers said.
  
  The company's shares rose by 5.5 sen to close at an intra-day high of 18.5 sen. Some 32 million shares changed hands, making it the day's most active counter.
  
  A business weekly reported last weekend, citing unnamed sources, that new information had surfaced that may soon get the company out of the problems it is in.
  
  MEMS had in late November last year announced it was hit by accounting problems, resulting in its share price plummeting.
  
  "There's talk that the company may find a way out of its troubles, but for now, this is mere speculation," a dealer said. ( link to article : here )

Ah, the weekend Business weekly.

So what do we have?

A company that was plagued by accounting issues, in which MEMS net earnings were overstated by a whopping 26.8% (ie net profits were reduced from 21.47 million to just 13.45 million!!!)

And the following point as stated in the posting, Regardings Mems Again..

• Consider the following...
  
  If Mems did not over-state their earnings, there would be no growth for 3 years!
  
  Without the growth, MEMS would have been rather unattractive and most of all, it would never had commanded such a rosy stock price.
  
  Just in July 2007, MEMS traded at a high of 81 sen, giving it a market valuation of 531 million.
  
  Now based on actual earnings of 13 million, surely this 81 sen would have been an insane stock price for Mems!
  
  Now consider this. Let me flip it around.
  
  Mems is now trading at 25 sen. Its market valuation is only some 163 million.
  
  So if the market valuation now is about fair for a company making only 13 million, then Mems is worth only some 163 million.
  
  However, due to the overstated earnings, MEMS was valued as much as some 531 million!!!

So now we have an UNNAMED SOURCES, ah the infamous source again, is suggesting that new information had surfaced that may soon get the company out of the problem it is in!

How nice. Publish an article based on UNNAMED SOURCES and the stock rockets a whopping 42%.

Kinda incredible if you asked me. I would bet many would die to want this UNNAMED SOURCES to have some hot news told on their vested stocks, yes?

And more incredible the last announcement made by Mems on Bursa was the following announcement

• We refer to the announcements dated 27 November 2007, 3 December 2007, 18 December 2007 and 2 January 2008.
  
  The Board of Directors of MEMS (“Board”) wishes to announce that the Company is in the process of deliberating the special audit report with its external auditors and as such is unable to issue the Outstanding Financial Statements by 31 January 2008. The Board will use its best endeavours to finalise and issue the Outstanding Financial Statements by end of February 2008.
  
  Nevertheless, if the Company fails to issue the Audited Financial Statements by 29 February 2008 (being 3 months from 30 November 2007) and Unaudited Quarterly Report by 31 March 2008 (being 3 months from 31 December 2007), in addition to the enforcement action that Bursa Malaysia Securities Berhad (“Bursa Securities”) may take, Bursa Securities shall suspend the trading in the securities of the Company. The suspension shall only be uplifted, unless otherwise determined by Bursa Securities, on the market day following the issuance of the above financial statements.
  
  This announcement is dated 31 January 2008.

And then you have this massive disposal of shares. Changes in Sub. S-hldr's Int. (29B) - AKN EQUITY VENTURES SDN. BHD.

• Disposed 18/01/2008 800,000
  Disposed 21/01/2008 800,000
  Disposed 22/01/2008 1,000,000
  Disposed 24/01/2008 800,000
  Disposed 25/01/2008 1,000,000
  Disposed 29/01/2008 600,000
  Disposed 30/01/2008 600,000

Tell you what.. if Mems denies what's being published by the weekend Business Weekly, then perhaps it's high time we question who are these UNNAMED SOURCES! Yeah, why are they passing misleading information to the press?

And consider the following, if the story is correct, how would you define such a leak by these sources to the Business Weekly? And I wonder did anyone profit from such action?

Hmmm....