THE Singapore Exchange&rsquo s regulatory arm on Monday (Jun 27) handed out notices of compliance to Catalist-listed companies Incredible Holdings and  Watches.com  over a series of transactions that would result in joint investments and cross-shareholdings.

 

Both companies share a common executive director, Christian Kwok-Leun Yau Heilesen, as well as the following board members: Jacob Leung, Stanley Leung and Zhou Jia Lin.

 

In October 2021, Incredible entered an agreement with Heilesen to acquire 42 per cent of a company, Golden Ultra, for S$14.6 million. Prior to this,  Watches.com  had also entered an agreement with Heilesen to acquire 55 per cent of Golden Ultra for S$14.4 million. The purchase was paid via the issuance of promissory notes by both companies to Heilesen, who also held the remaining 3 per cent interest in Golden Ultra.

 

In a similar vein, Incredible inked an agreement with a third-party vendor to acquire 15 per cent of Gadmobe Group for S$3.1 million.  Watches.com  had likewise also entered an agreement with the vendor to acquire 85 per cent of Gadmobe for S$15.2 million. Both companies paid by issuing promissory notes to the vendor.

 

Later in December 2021, Incredible subscribed for S$9 million perpetual convertible bonds issued by  Watches.com, as well as 10 billion free warrants.  Watches.com  also subscribed for S$9 million of perpetual bonds and perpetual convertible bonds issued by Incredible, as well as 1 billion free warrants.

 

In May this year, Incredible obtained shareholders&rsquo approval for the concurrent subscription in securities issued by  Watches.com  and vice versa. Incredible said that this is so that it does not have to use its cash to subscribe for  Watches.com&rsquo s shares as a long-term investment.

 

It is unclear what the rationale is for this series of transactions and how they will help Incredible and  Watches.com, SGX RegCo said, noting that it has issued both companies numerous queries over the past year. Furthermore, they have substantially similar members on their audit and nominating committees.

 

As such, SGX RegCo has directed that the audit committees of Incredible and  Watches.com  appoint a suitable joint independent reviewer to perform a holistic review of all corporate actions and fund-raising exercises announced by both listed companies in the past year.

 

The reviewer will assess whether these transactions and corporate actions were entered into on normal commercial terms and are not prejudicial to the interests of the companies and their minority shareholders.

 

Both companies cannot proceed with any of the announced corporate actions and fund-raising exercises nor propose any further corporate actions prior to completion of the independent review, and satisfactory resolution of issues raised by the joint independent reviewer.