Hong Kong’s stock market regulator the Securities and Futures Commission (SFC) said in a Wednesday statement that it was investigating listed entities LET Group Holdings Ltd and Summit Ascent Holdings Ltd for possible breach of its rules “regarding a very substantial disposal of a major asset of LET and Summit Ascent, namely, the sale of assets in Russia for US$116 million,” which came to the regulator’s attention “on 29 January 2024”.
It also confirmed suspension – until further notice – in any dealings in the respective companies’ shares. The two companies had mentioned the SFC action in their own respective announcements to the bourse on Wednesday.
On January 17 Summit Ascent had confirmed in a filing that a majority-owned subsidiary was to sell, for US$116-million, G1 Entertainment LLC, the gaming licence holder of the Tigre de Cristal casino resort (pictured) in the Russian Far East. It cited “uncertainties arising from the ongoing Russia-Ukraine conflict”. The news had emerged initially via a January 10 filing to the Taiwan Stock Exchange by a Taiwan company that had held a stake in Oriental Regent Ltd, a Summit Ascent subsidiary associated with the Russia licence.
Hong Kong’s SFC noted in its Wednesday update that the relevant asset had been “at all material times indirectly held by Summit Ascent through a 77.5-percent owned subsidiary”.
Summit Ascent’s stock had been in a trading suspension on the Hong Kong Stock Exchange since January 11. The stock of LET Group, Summit Ascent’s parent, had also been in a trading suspension with effect from the same date.
The SFC stated in its Wednesday announcement that the sale and purchase agreement relating to the very substantial disposal had been executed and completed without “the required approval of shareholders”.
This was on the basis that the deal had to be “approved by at least 75 percent of the votes cast by disinterested shareholders at the meeting and the disapproving votes representing not more than 10 percent of the votes attached to all disinterested shares”.
With effect from January 15 all but one of Summit Ascent’s six directors had resigned, “due to their disapproval” of the transaction. The step left only regional casino investor Andrew Lo Kai Bong as a director and chairman.
The same extent of director exodus took place at LET Group, for the same reason, leaving only Mr Lo as chairman and executive director.
The SFC said that it had asked both firms to “address its concerns” about the Russia deal. But it added: “Both companies have failed to respond to the SFC.”
The regulator further noted: “The SFC also has serious concerns about the conduct of the two companies and their management.”
The SFC stated it considered that “suspending the dealings in the shares of LET and Summit Ascent is desirable for the purpose of maintaining a fair and orderly market and protecting the interest of the investing public,” adding its investigation “is ongoing”.
The SFC also said that it appeared that after the completion of the deal, “LET and Summit Ascent may not have a business with a sufficient level of operations and assets of sufficient value to support their operations to warrant a continued listing status of their shares” in the Hong Kong bourse.
“As a result, LET and Summit Ascent may not be regarded as suitable for listing under the listing rules,” it added.
