Shareholder unhappiness brewing at Cordlife

Shareholder unhappiness is simmering on various fronts as listed Cordlife battles to get a handle on the turmoil that has engulfed the cord blood bank in recent months.

The investor disquiet revolves around some members of the board. Resolutions to vote out four directors, including acting chairman Ho Choon Hou, and appoint three new faces have been tabled for the annual general meeting (AGM) on May 14.

There is also unhappiness over the firm’s bid to launch a share placement. The move sparked a legal challenge from a key shareholder and was halted by a High Court injunction on April 19, but the firm is appealing this.

Cordlife hit the headlines after news that some of its storage tanks were not kept at the optimum temperature, and cord blood units were damaged.

Its then chief executive Tan Poh Lan left in October 2023, and a replacement was found only in February 2024. In March, the Commercial Affairs Department arrested and interviewed four board directors and Ms Tan over potential disclosure breaches.

Then came the announcement on April 17 that the firm planned to raise $8.2 million by issuing 51.2 million new ordinary shares at 16 cents apiece.

The shares were to have been placed out to two subscribers – Charming Global Enterprises and Mr Darren Ng, a wealthy individual based in Singapore. Charming Global Enterprises is owned by Mr Jiao Shuge, a co-founder of CDH Investments, a private equity and venture capital firm based in Beijing.

Key shareholder Nanjing Xinjiekou Department Store (Nanjing XJK), and non-executive directors Zhai Lingyun and Chen Xiaoling applied for a High Court injunction to prevent certain conduct, including the placement.  

Nanjing XJK, which is one of the largest players in China’s cord blood banking industry, holds 20.24 per cent of Cordlife. This stake combined with that of its affiliate, China Stem Cells (East) Company, gives it about 30.2 per cent of Cordlife, making it the largest shareholder.

The legal challenge was successful, and an interim injunction was granted. However, Cordlife has asked the court to set aside this ruling. This application will be heard on May 10. 

Cordlife had stated that about half of the funds raised – about $4 million – will go to working capital and the rebuilding of the Singapore brand. The rest will go to a contingency fund. 

It added that the funds raised will give it enough working capital to meet its present requirements and allow it to continue as a going concern.

But Cordlife is in a net cash position and seems financially healthy enough at present, based on its financial statements as at Dec 31, 2023, which comprise around $68 million in fixed deposits and cash.  

While there will certainly be a financial fallout from the problems with the tanks, the case is still playing out. Raising money to rebuild its brand at this juncture seems a premature move.

But this is only the latest development. There were eyebrows raised in February over the apparent lack of experience of Mr Ivan Yiu Pang Fai, the 34-year-old who took over as CEO amid the tank-temperature turmoil.

Mr Yiu’s family owns TransGlobal Real Estate Group, which is another large shareholder of Cordlife, with a 27.88 per cent stake, according to the 2023 annual report.

Nanjing XJK wants to remove four directors – Dr Ho, independent directors Yeo Hwee Tiong, Titus Cheong and Joseph Wong Wai Leung, and appoint three new directors. Mr Wong has said he will retire after the AGM.

These resolutions have now been included as part of special business in the AGM set for May 14. 

Nanjing XJK said on May 9 that a “series of corporate governance failures (have) eroded customer trust and shareholder value”, and called on shareholders to support the resolutions at the AGM.

It added that the proposed new directors – Dr Teo Tong Kooi, Mr Cai Yong and Dr Xu Tianhong – have decades of experience in business and consulting, corporate restructuring and healthcare.

Nanjing XJK noted that it can transfer experienced staff from its offices in China, the United States and Hong Kong to help improve operations and capture new opportunities.

It can also assemble a team of lab professionals to identify qualified sample testing facilities and work with various agencies to stabilise Cordlife’s operations.

The important dates to watch will now be what happens after the hearing on May 10 on the share placement, and whether the resolutions will succeed at the AGM. 

Source: Straits Times © SPH Media Limited. Permission required for reproduction.

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