Hong Kong Investment Group Sees Shares Plunge After Scam Allegations
iRegent Group, whose
shares are listed in Hong Kong, entered crisis mode this week
as its shares plunged 28 per cent to an all-time low of HK$0.52,
after its South Korean merchant bank said it faced a liquidity
crisis because of a run on deposits. Trading in shares was suspended
earlier this week when the group's Regent Merchant Bank in Seoul
was hit by the run on deposits in connection with a loan scandal.
The crisis stems
from allegations that the chairman of investment company iRegent
Group, Jim Mellon, manipulated the share price of a South Korean
associate. However, Mr Mellon has categorically rejected the accusations,
saying this week: 'There is no case to answer and none has been
made. There is not a shred of evidence against me - no e-mails,
no conversations, nothing' Korean authorities
have asked prosecutors to investigate Mr Mellon and KoreaOnline,
a financial services company held 46 per cent by iRegent. The
precise allegations are that shares in Korean brokerage Regent
Securities - in which KoreaOnline holds 57 per cent - were manipulated
by Jin Seong-hyun, president of venture capital firm MCI Korea
and Koh Chang-kon, former chief executive of Regent Securities.
Mr Jin has alleged that Mr Mellon told him to buy shares in Regent
Securities which would be later bought by KoreaOnline at a higher
price. In order to try and
get back on an even keel, Regent Merchant Bank has managed to
get the agreement of its corporate clients not to withdraw funds
until mid-December. Regent will resolve the crisis by selling
shares in KoreaOnline and obtaining loans from KoreaOnline, the
Korean subsidiary of iRegent.com and the holding company for Regent
Merchant, Regent Securities and other financial institutions in
Korea. Some brokers have
predicted that iRegent Group's share price will not recover until
the investigation by the Korean authorities is completed. Kenny
Tang Sing-hing, associate director of Tung Tai Securities, said:
'The share price is still likely to be under pressure because
there is no concrete result from the Korean side.' Another broker
expected iRegent Group to have trouble regaining its credibility
in Korea and may have to consider pulling out. However, Mr Mellon
said iRegent would stand by its Korean investments, stating: 'We
do not intend to deviate from our strategy in Korea and while
this incident is annoying and damaging it will not deflect us.
KoreaOnline . . . has been an excellent investment, even after
the past few harrowing days, for iRegent and will continue to
be so.' .
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