DIC Corp faces massive sell-off amid violation fees and state inspection scandal

This move comes in response to the recent inspection conclusions regarding the corporation's privatization and state divestment processes. All necessary actions are set to be completed by September 25th.

Stock turmoil following inspection news

On August 27th, DIC Corp's stock (DIG) was hit hard, with shares plunging at one point to the daily limit. Although the stock recovered slightly, it still closed down 4% at VND 24,050 per share, wiping out a significant portion of the company's market capitalization, which now stands at over VND 14,700 billion.

The sell-off was fueled by nearly 42 million shares changing hands, the highest volume on the exchange, representing almost 7% of the company’s total outstanding shares. This surge in trading volume is double the average for the past year and triple the volume of the previous session.

The massive sell-off was triggered by the release of the Government Inspectorate’s conclusions, which highlighted significant issues in DIC Corp’s privatization and state divestment processes.

Corporate response and compliance plans

In response to the negative news, DIC Corp issued an official statement, outlining its commitment to address the findings. The company confirmed that it has devised a comprehensive plan to implement Inspection Conclusion No. 1288/KL-TTCP, which scrutinizes the corporation's adherence to legal requirements during its privatization and state divestment.

As part of its compliance, DIC Corp will pay the VND 2.4 billion penalty for violations related to asset valuation on land before September 25th. Additionally, the corporation will work with the Ministry of Construction to conduct an administrative review of both organizational and individual responsibilities, also by September 25th.

DIC Corp’s leadership emphasized that the inspection and oversight by the Government Inspectorate, as well as other relevant state bodies, play a crucial role in strengthening the corporation’s governance and operational management.

"We remain steadfast in our commitment to the rule of law, transparency, honesty, and the protection of shareholder and customer rights," the company stated.

The corporation also urged its shareholders to remain calm and to carefully assess information to safeguard their interests, continuing their support for the company as they have done in the past.

Inspection reveals multiple shortcomings and violations

The inspection report revealed several shortcomings in DIC Corp’s privatization process, including procedural errors and incorrect asset valuation, leading to a VND 2.4 billion discrepancy. Furthermore, the corporation failed to reassess the land use rights value for certain properties.

The report also identified issues with financial management during the transition to a joint-stock company and the private placement of shares in 2009, which require review and correction.

In 2017, the state divestment process also encountered violations, such as the approval of plans without consulting the Ministry of Finance and the Ministry of Planning and Investment, as well as the failure to provide complete information to the consulting unit.

The Government Inspectorate attributed the responsibility to the leadership of the Ministry of Construction during the periods 2007-2009 and 2016-2017, as well as to the DIC Corp privatization steering committee and other related organizations and individuals.

The agency recommended that the Prime Minister instruct the Ministry of Construction to review the individuals involved, mandate corrective actions for the financial issues, and clarify accountability in the 2009 private placement share pricing and the reassessment of land use rights value for the Dai Phuoc Ecotourism Urban Area project.

Positive aspects of privatization and divestment

Despite the shortcomings, the privatization and state divestment processes at DIC Corp successfully mobilized resources from various economic sectors, enhancing the corporation's financial capacity and operational efficiency.

Since privatization, the company's charter capital has grown from VND 370 billion to VND 2,382 billion, and total assets have increased from VND 2,319 billion to VND 6,133 billion. The state capital dividends amounted to over VND 400 billion.

The value of the state capital rose from VND 240 billion to VND 1,182 billion, while the divestment process generated VND 2,274 billion for the Enterprise Arrangement and Development Support Fund, with a capital surplus of VND 1,092 billion.

Overall, the privatization and divestment were completed within the timeframe and guidelines set by the Government.

Source: vietnambiz

Compiled by Vietnam Business Information