The margin squeeze

MARGIN calls are part and parcel of the stock market. There are many traders who have margin accounts given the use of debt to leverage on stock purchases can add to gains.

The same is with owners of companies. There are major shareholders who will pledge their shares in a company to free up cash. But the risk is that if the shares fall, then there are consequences. Either they top up their margin accounts to account for the short fall or their shares get sold.

In December 2018, Prestariang Bhd’s president and Dr Abu Hasan Ismail was forced to sell his shares in the company because of a margin call.

He lost controlling shareholding in the company that was rocked by a steep drop in the share price following the loss of a major government contract.

The same happened with Datuk Awang Daud Awang Putera, who was the co-founder of Serba Dinamik Holdings Bhd.

Some 8.5 million shares were sold as the stock remained under pressure following accounting issues.

He says the sale of the shares is largely due to the technicalities of the stock market margin call and was not an offloading of shares exercise.

Awang Daud says he is confident of the prospects and future of the global integrated engineering services provider despite disposing of a small percentage of the group’s shares.

And he says he is not parting ways from Serba Dinamik, a company he helped co-found with Datuk Abdul Karim Abdullah.

“I have known Karim for innumerable years and I place great faith in his leadership abilities which has taken the group to where we are today,” says Awang Daud, who, in a statement, says has been connected to the group in various and diverse capacities since its inception.

He is confident that the board of directors and senior management of the group will carry out all the necessary steps to clarify any queries pertaining to the audit issues highlighted by KPMG PLT to safeguard the interests of its stakeholders.