Sunday, June 19, 2011

How To Bankrupt A Listed Company

I was talking to a...well I would say a manager of a listed company in Malaysia. We came across a topic on how Isome manufacturing firms in this country syphon money out from them. it isn't a definitive way but I would say one of the way. It is really some good insight, and I think I have to revisit some of the accounting in The List.

Suppose a manufacturing firm were to purchase a new machine or equipment worth RM10mil. And they choose to finance it from bank. Instead of borrowing RM10mil, they borrow RM25mil instead. That extra RM15mil, well.....you know where it goes. How did the bank able to loan out RM15mil extra? 2 possible reasons. One, bankers....how would they possibly know how much that machine worth especially it is some "new" equipment. Plus the more they loan the more they earned. No big deal. Two, buyer, seller and loaner work out a "deal".

You would say this only involves some executives and directors who are suppose to look after shareholders' interest overlook such activity. I would say, it goes as high as there and even the owner (executive owner/founder). Owner? How would an owner does that to a company he owns? Well, what do you think happened during an IPO.

I remember I went to a seminar where the presenter mentioned Malaysia Semua Boleh. This is Bolehland anyway. I'll share out more if I have anything new especially on how shareholders got leaked.



Link to BolehLand

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