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In response, Chartered sent the following email:
"We do not comment on rumours. Targeted for initial ramp in late 3Q03, Fab 7 will be an all-copper, 0.13-micron, 300-mm facility with a pilot line of approximately 1,500 12-inch wafers per month. The rationale behind Fab 7 is one of capacity, not technology, which enables us to regulate the expenditure on Fab 7 depending on the outlook for the semiconductor market growth. Chartered is well positioned with a strong balance sheet and as of June 30, 2002, our cash balance was US$831 million with credit facilities of over $620 million. Our capex for this year is $500 million and this amount is well supported by our strong financial position.
The long-term growth rate of the foundry industry is generally expected to be higher than that of the semiconductor industry. The semiconductor industry is a high growth, capital intensive industry and there will be on-going financing requirements. Chartered's strategy is to stay ahead of the curve and to go to market on our terms, while still ensuring that we have ample cash strength to provide flexibility. Chartered remains focused on running and growing the business, to best support our customers and meet market opportunities."
The media published their stories (see Appendix A).
On Friday, 30 August 2002, as a result of a significant fall in Chartered's share price, the Exchange queried Chartered.
On Monday, 2 September 2002, before the market opened, Chartered announced its 8-for-10 rights issue. Following the rights announcement, Chartered's share price fell from $2.10 to $1.60.
Later on 2 September, Chartered formally responded to the Exchange's query, stating:
"In response to the letter from Singapore Exchange Securities Trading Limited ("SGX") dated Friday, 30 August 2002 received by the Company slightly before the close of trading on the SGX, the Company wishes to inform that its Board of Directors has in a meeting held on Saturday, 31 August 2002 approved an offering of new ordinary shares of S$0.26 each in the capital of the Company by way of a renounceable rights offering. The Company has accordingly released an announcement on the rights offering via MASNET on Monday, 2 September 2002 before the start of trading on the SGX."
The Exchange has since made further inquiries of Chartered. Chartered said that it did not believe that there was a leak of information regarding its proposed rights issue. Chartered has told the Exchange that at the time of the media inquiries, the terms of the offering (size of the offering, ratio of the rights offer, and subscription price) had not been finalized and board approval to launch the offering had not been obtained. Chartered in response to the Exchange's queries also said that the reports which were published on 27 August 2002 carried conflicting opinions and views. As to why Chartered did not correct the reporting, it said:
"We determined after consulting with our legal advisors over the course of 27 and 28 August 2002 that under the circumstances it was not necessary to issue any additional press releases to address the conflicting opinions and views. As of 27 August 2002, we were still evaluating the structure, terms and timing of a rights issue and were targeting a launch date of the second half of September. As such, any announcement we could have made would have been very vague, since the structure, terms and timing of the offering were still being analyzed."
Chartered's Listing
In 1999, when Chartered was listed, the approval included a waiver of compliance with the continuing listing rules of the Singapore Exchange (then SES) subject to Chartered:
"(a) releasing to the SES and the Singapore market all announcements and filings made in the US at the same time or as soon as practicable after such announcements are made in the US so that investors in Singapore are not placed at a disadvantage to those in the US;
(b) submitting to the SES as soon as practicable, copies of all applications made to NASDAQ after such applications have been made;
(c) disclosing in future circulars to shareholders that it is subject to NASDAQ and US continuing listing rules alone and not the SES continuing listing rules; and
(d) disclosing in the Company's 'wraparound' of the prospectus that it is subject to NASDAQ and US continuing listing rules alone and not the SES continuing listing rules."
Chartered has confirmed to the Exchange that it is in compliance with NASDAQ and US continuing listing requirements.
The Listing Rules
The Exchange's Corporate Disclosure Policy says (paragraph 16 of Appendix 7.1 of the listing rules):
"If rumours indicate that material information has been leaked, a frank and explicit announcement is required. If rumours are in fact false or inaccurate, they should be promptly denied or clarified. A statement to the effect that the issuer knows of no corporate developments that could account for the unusual market activity can have a salutary effect. In addition, a reasonable effort should be made to bring the announcement to the attention of the party that initially distributed the information (in the case of an erroneous newspaper article, for example, by sending a copy of the announcement to the newspaper's financial editor, or in the case of an erroneous market letter, by sending a copy to the broker responsible for the letter). If rumours are correct or there are developments, an immediate statement to the public as to the state of negotiations or corporate plans in the rumoured area must be made. Such statements are essential despite the business inconvenience which may result, even if the matter had yet to be presented to the issuer's board of directors for consideration."
Discussion
In response to media inquiries, Chartered adopted the course of issuing a 'no comment' together with information regarding its cash balance, credit facilities and capital expenditure. The alternatives open to Chartered included making a holding announcement given that it was working on the structural aspects of a rights issue, making a full statement, or seeking suspension of trading until a full statement could be made.
In this case, Chartered made a judgment that it was not necessary to clarify the rumour. The Exchange accepts that the judgment Chartered had to make was difficult.
The emailed response could have been released on MASNET. Moreover, one of the concerns raised by Chartered in response to the Exchange's queries was that not all the reporting of its emailed response was accurate. Chartered could have corrected the inaccuracy, but did not do so for the reasons given above.
The Exchange has a policy of requiring MASNET to be used because:
(a) MASNET allows all investors equal access to the company's announcements, through the Exchange's website; and
(b) Importantly, as this case demonstrates, MASNET allows a company to inform investors in its own words and in context.
All listed companies must use MASNET to release material information or to clarify rumours where no new information is disclosed but the clarification may affect the share price or trading volume. This must be done regardless of whether the matter had been presented to the board of directors for consideration. In addition, the Exchange would like to remind all listed companies that they would be well-advised to also use MASNET when they respond to a rumour even if there is no clarification required by the Corporate Disclosure Policy. This protects both the company and the marketplace and reduces any impact of conflicting opinions and views.
Conclusion
Chartered is not required to comply with the listing requirements of the Exchange, but Chartered could have given the market more information. We would also like to urge that, in future, Chartered uses MASNET in such circumstances. Had it done so here, it would have mitigated the impact of inaccurate media reports, and allayed public concerns.
The Exchange has discussed this matter with Chartered and considers this matter closed.
Date: 25 September 2002
Appendix A
1. Chartered Semi says financial position strong; may borrow when necessary
Manny Serapio, AFX – Asia
August 27, 2002
Chartered Semiconductor said its financial position remains strong but is not ruling out the possibility of raising more funds in the future when necessary.
Chartered was responding to market rumours that the company is planning a rights issue to partly fund the construction of its latest wafer fabrication plant, Fab 7.
"We do not comment on rumours," said Clarence Fu, Chartered director for investor relations.
He said Chartered has a strong balance sheet with cash balance of 831 mln usd and unused credit facilities of over 620 mln as of end-June.
"Our capex (capital expenditure) for this year is 500 mln usd and this amount is well supported by our strong financial position," he added.
He said Fab 7 is only targeted to start production by the third quarter of 2003.
"The rationale behind Fab 7 is one of capacity, not technology, which enables us to regulate the expenditure on Fab 7 depending on the outlook for the semiconductor market growth."
But Fu said the semiconductor industry remains a capital intensive industry" and added "there will be ongoing financing requirements."
"Chartered's strategy is to stay ahead of the curve and to go to market on our terms, while still ensuring that we have ample cash strength to provide flexibility," he said.
At 4.18 pm, Chartered was down 0.09 sgd at 2.41, off a low of 2.37, on volume of 20.3 mln shares.
Jonathan Burgos - AFX – Asia
August 27, 2002
Chartered Semiconductor shares extended losses in early afternoon trade on rumours the company is considering launching a rights issue to partly finance construction of its latest wafer fabrication plant, Fab 7, dealers said.
Analysts were not sure how much Fab 7 will cost to build but they said Chartered's cash on hand as well as unused credit facilities may not be enough to finance the project.
At 2.55 pm, Chartered Semiconductor was down 0.11 at 2.39, off a low of 2.37, with 15.60 mln shares traded.
The Straits Times index was down 14.37 points at 1,501.67.
They added there are also concerns Chartered Semiconductor may revise its guidance for the third quarter when it releases its mid-quarter guidance next week.
"Chartered Semiconductor won't have enough funds if they push ahead with current plans," an analyst with a local brokerage said.
Fab 7 is expected to start commercial operations next year but if Chartered Semiconductor decide not to proceed with the project, the analyst said he does not see Chartered Semiconductor losing out on market opportunities since the group still has ample capacity.
If Chartered does decide to push ahead with current plans for Fab 7, any fund raising exercise is unlikely to involve the immediate issuance of equity, he said.
Chartered Semiconductor had in the past issued convertible notes.
It could not be immediately reached for comment.
Jennifer Tan, Reuters
August 27, 2002 06:12 AM ET
(Recasts with company comments, analyst quote, share price)
SINGAPORE, Aug 27 (Reuters) - Shares of Chartered Semiconductor Manufacturing CHRT.O slumped to record lows in active trade on Tuesday on talk the world's third-largest contract microchip maker might do a rights issue.
"We do not comment on market rumours," Singapore-based Chartered's chief financial officer George Thomas told Reuters. "Our funds are sufficient to keep us going."
Chartered ended down seven cents or nearly three percent at a record closing low of S$2.43 after setting a new intraday low of S$2.37. Volume was a heavy 22 million shares.
The company had priced its shares at S$3.34 each in its initial public offering in October 1999.
Dealers said there were all sorts of rumours swirling about Chartered, including talk the company was planning a rights issue to fund its most advanced 300-mm wafer fabrication plant, Fab 7.
REGULATING EXPENDITURE
"The rationale behind Fab 7 is one of capacity, not technology, which enables us to regulate the expenditure on Fab 7, depending on the outlook for the semiconductor market growth," Chartered spokeswoman Maggie Tan said in an e-mail reply to Reuters.
She declined to comment on the rumours.
Fab 7, which will use advanced 0.13-micron process technology, will start production in the late third quarter of 2003, with output of 1,500 12-inch wafers per month, Tan said.
Chipmakers are moving towards increasingly larger wafers and thinner line widths so that more chips can be packed into each wafer, boosting productivity.
Chartered has US$831 million in cash and about $620 million in credit lines on standby, with the group's current debt level at slightly over $1 billion.
The company has earmarked $500 million in capital expenditure for 2002 and has spent $169 million as at June 30, Tan said.
"The semiconductor industry is a high-growth, capital-intensive industry and there will be ongoing financing requirements," she added.
"Chartered's strategy is to stay ahead of the curve and to go to market on our terms, while still ensuring that we have ample cash strength to provide flexibility."
Kim Eng Ong Asia Securities analyst Dharmo Soejanto said it was unlikely Chartered would make a rights issue when market conditions are volatile.
"It would be crazy to try to raise money at its current share price, which is at a record low," he said. "They definitely need the money and it's just a matter of when it's a good time and the share price picks up."
Reuters
August 27, 2002 09:50 PM ET
SINGAPORE, Aug 28 (Reuters) - Singapore shares opened slightly weaker on Wednesday after gloomy U.S. economic data and a fall on Wall Street.
Dealers say the local bourse is likely to be range-bound this week in thin volumes in the absence of market-moving news.
At 0131 GMT, the bellwether Straits Times Index was down 0.71 percent or 10.72 points at 1,498.76.
In the broader market, losers outnumbered gainers 66 to 25 in low volume of 45 million shares.
U.S. stocks ended lower on Tuesday after a report fanned fears consumers will snap their wallets shut and stifle an economic upturn, while a dull outlook from Intel Corp INTC.O spurred selling in the technology sector.
The United States is a key export market for Singapore, particularly for electronics.
Venture Corp VENM.SI , Singapore's largest electronics contract manufacturer, fell 2.24 percent to S$13.10 to top the list of losers. Computer peripherals maker Creative Technology CREA.SI CREAF.O eased 0.66 percent to S$15.10.
ST Assembly Test Services STTS.SI STTS.O , Asia's fourth-largest computer chip testing and packaging firm, fell 2.2 percent to S$1.78.
Chartered Semiconductor CSMF.SI CHRT.O sagged 2.47 percent to S$2.37. The stock slumped to record lows in active trade on Tuesday on talk the world's third-largest contract microchip maker might do a rights issue to fund a new wafer plant.
"We do not comment on market rumours," Singapore-based Chartered's chief financial officer George Thomas told Reuters on Tuesday. "Our funds are sufficient to keep us going."
Banks also headed downwards.
UOB, Singapore's largest domestic lender and a major component of the main index with a weighting of more than 16 percent, was down 0.75 percent at S$13.30.
Southeast Asia's largest bank, DBS Group DBSM.SI , lost 0.83 percent to S$12.00. OCBC, the city state's smallest bank, slipped 0.91 percent to S$10.90.
Europtronic Group ETGL.SI was among the most actively traded stocks and fell 4.76 percent to S$0.50 after the maker of film capacitors said it was placing out 30 million new shares to raise net proceeds of about S$14.5 million.
Transportation firm Comfort Group COMF.SI dropped 1.97 percent to S$0.745 after it went ex-dividend on Wednesday.
Hotel Properties HPPS.SI was down 0.96 percent at S$1.03. On Tuesday, it reported a 28 percent fall in first-half net profit to S$12.15 million due to lower income from development projects.
Healthcare company Raffles Medical Group RAFG.SI gained 5.17 percent to S$0.305 after the firm posted a 51 percent rise in first-half net profit to S$1.3 million, thanks to the boost in revenues from its new general hospital.
By Edna Koh, Straits Times
August 28, 2002
SHARES of Chartered Semiconductor Manufacturing slumped as much as 5.2 per cent yesterday on rumours that the company would be issuing new shares via a rights issue to fund the equipping of Fab 7, its latest foundry.
When contacted, the world's third-largest supplier of computer chips said: 'We do not comment on rumours.'
On a more general note however, Chartered's director of investor relations, Mr Clarence Fu, suggested that a fund-raising exercise was not necessary in the immediate future.
In response to media queries, he said the rationale for setting up Fab 7 - Chartered's new 300mm foundry, which is slated to start production in the third quarter of next year - 'is one of capacity, not technology'.
This enables Chartered to 'regulate' its expenditure on the new foundry, 'depending on the outlook of the semiconductor market growth'.
Chartered also has a strong balance sheet, with cash of US$831 million (S$1.47 billion) and unused credit facilities of more than US$620 million as at end-June.
The firm's capital expenditure of US$500 million this year is 'well-supported' by this strong financial position, Mr Fu said.
Chartered's statement, which dispelled market talk of an impending fund-raising exercise, helped moderate the selldown, with its shares clawing back later in the day.
Despite this, the counter still closed at an all-time low of $2.43 - down seven cents, or 2.9 per cent, on 21.97 million shares traded.
However, although analysts agreed that the rights issue rumour was unlikely to be credible - given that Chartered would be better off raising capital under more favourable market conditions - they said a fund-raising exercise was not a question of if, but when.
The inevitable dilution effect of a rights issue, 'will cast a shadow on the stock', said the research head of a local brokerage.
Apart from the rumours, the counter is also not helped by the poor outlook plaguing the semiconductor industry as whole.
In a research report released last week, Salomon Smith Barney said that although global semiconductor sales continued to improve in the second quarter, orders had slowed, causing the investment bank to lower its full-year growth estimate for the industry to 0.5 per cent from 4 per cent previously.
Reuters
August 27, 2002 03:20 AM ET
SINGAPORE, Aug 27 (Reuters) - Shares of Chartered Semiconductor Manufacturing CHRT.O slumped in active trade on Tuesday on talk the world's third-largest contract microchip maker might do a rights issue.
"We do not comment on market rumours," Chartered's chief financial officer George Thomas told Reuters. "Our funds are sufficient to keep us going."
At 0715 GMT, Chartered was down 11 cents or more than four percent at S$2.39 after hitting a new record low of S$2.37. Volume was an active 15.6 million shares.
Dealers said there were all sorts of rumours swirling about Chartered, including talk the company was planning a rights issue to fund its latest wafer fabrication plant, Fab 7.
Chartered has US$800 million in cash and more than $600 million in credit lines on standby, with the group's current debt level at slightly over $1 billion.
- AFX – Asia
August 27, 2002
Chartered Semiconductor shares were down 0.08 sgd at 2.42, off a low of 2.39, on rumours that the company is considering a rights issue to partly finance the construction of its latest wafer fabrication plant, Fab 7, dealers said.
Analysts were not sure how much Fab 7 will cost to build but they said Chartered's cash on hand as well as unutilised credit facilities may not be enough to finance the project.
They added that there are also concerns that Chartered Semiconductor may revise its guidance for the third quarter when it releases its mid-quarter guidance next week.
Chartered Semiconductor officials could not be immediately reached for comment.
jonathan.burgos@afxnews.com
- 475 words
27 August 2002, 16:31
Dow Jones International News
English
(Copyright (c) 2002, Dow Jones & Company, Inc.)
SINGAPORE -(Dow Jones)- Chartered Semiconductor Manufacturing Ltd. (CHRT) said Tuesday it has enough funds to finance capital expenditure plans for the year.
"Our capex for this year is US$500 million and this amount is well supported by our strong financial position," said company spokeswoman Maggie Tan in a emailed response to Dow Jones Newswires.
The comment comes as some market players speculate the world's third biggest contract maker of computer chips may make a rights issue to fund its newest wafer fabrication plant, Fab 7.
Chartered said it didn't comment on rumors, which traders noted were vague and had been around for some time.
Chartered stock lost as much as 5.2% Tuesday, before recovering to S$2.42, down 3.2% by 0830 GMT (4:30 a.m. EDT).
Fab 7 is a wholly owned wafer fabrication plant which will make high-end 12-inch wafers. The plant will be able to make about 1,500 12-inch wafers per month initially.
"It doesn't make sense for Chartered to be doing a rights issue or even a convertible bond issue now that the share price is at its lowest level ever," said Dharmo Soejanto, an analyst at Kim Eng Research.
Chartered, which is about 60.6% owned by government-linked Singapore Technologies Pte. Ltd., raised US$500 million via convertible bonds in March last year.
Chartered said its balance sheet at the moment is "strong," adding it has a cash balance of US$831 million and credit facilities of o
