Frankly Speaking: Who is accountable for FIC’s bad investments?

This article first appeared in The Edge Malaysia Weekly, on July 9, 2018 - July 15, 2018.
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Felda Investment Corp Sdn Bhd (FIC), a unit of the Federal Land Development Authority, is no longer a substantial shareholder of oil and gas outfit Barakah Offshore Petroleum Bhd, having disposed of 4.5 million shares on the open market on June 18.

Filings with Bursa Malaysia show that FIC started selling the shares on June 8. The stock was trading at 12 sen to 19 sen, or an average of 16.4 sen, from June 8 to 18.

Although Barakah paid a dividend of two sen per share in July 2015, which translated into a payout of RM1.47 million to FIC, the investment seems to have been a bad one.

FIC became a substantial shareholder of Barakah in November 2014, after buying 73.5 million shares in a direct trade, which raised its stake to 9.73%. Back then, it was reported that a chunk of Barakah shares had been traded in an off-market transaction at RM1.36 to RM1.37 apiece.

FIC also bought a 20% stake or 394.1 million shares in IRIS Corp Bhd at 28 sen apiece in April 2015, upping its equity interest to 26.71% or 526.37 million shares. Other than the sale of 10 million shares in April 2015 at 32 sen to 33.4 sen, all its share sales have been below its entry cost.

It is understandable that investments come with risks, given the fluctuation in share prices. However, the two examples above raise questions about FIC’s investment strategy and, bluntly put, its investment committee’s capability. Under the circumstances, who is accountable for the loss of public money?

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