The Department of Special Investigation (DSI) agreed last Thursday to investigate SET-listed Stark Corporation Plc for fraud committed by its former executives, which resulted in the loss of billions of baht.
While the probe is a positive step, it is long overdue. This investigation comes two months after the suspects disappeared with the money.
The inaction has allowed the situation to worsen, causing substantial damage to investors' confidence.
The scandal surrounding Stark has sent shockwaves throughout the investment community.
The slow and delayed actions of regulators, particularly the Securities and Exchange Commission (SEC), have exposed serious flaws in their regulatory mechanism. Although the SEC currently lacks a leader, this should not serve as an excuse.
The Stark scandal reveals problems with various procedures in the stock market involving many actors, from the rating agency that granted investment-grade status to the company's financial instruments, auditors who overlooked irregularities, regulators who failed to monitor problematic behaviour and issue effective warnings to investors, and law enforcement agencies that did not take prompt action.
It is essential for authorities to acknowledge that swift action is vital in safeguarding investors' interests and preserving the credibility of the stock exchange.
Stark's listing followed a backdoor listing through Siam Intermedia Plc, which acquired Phelps Dodge International (Thailand), a US wire and cable manufacturer, and changed its name to Stark Corporation.
The company acquired wire and cable producers in Vietnam.
It then reported an impressive financial performance by transforming losses into a net profit of 1.6 billion baht in 2020 and 2.8 billion baht in 2021.
However, despite showing substantial profits and a skyrocketing share price, the company failed to pay dividends to investors.
In 2022, Stark entered a share purchase agreement with Leoni AG and Leoni Bordnetz-Systeme GmbH, global suppliers of wires, cables, and wiring systems.
For these expansions, Stark raised capital through bond issues, loans and capital increases and received overwhelming support from institutional investors, shareholders, and creditors who saw promising prospects for the company.
But the company later abruptly cancelled the deal. It also failed to submit its financial statements for the previous year on time. Stark's share price plummeted by over 90% in a single day.
The recent release of the company's financial statements reveals a net loss of 6.6 billion baht for last year.
Chanin Yensudjai, the company's CEO, resigned in April and has been missing since. Vonnarat Tangkaravakoon, Stark's largest shareholder and a director of the SET-listed TOA Paint (Thailand), has denied any involvement in fraud and embezzlement in the company.
In addition to Stark, several other companies have severely damaged investor confidence in the Thai stock exchange due to unusual movements in their shares.
Urgent action is required to rectify these shortcomings, ensure accountability for wrongdoers, and restore faith in the stock market.
Only through swift and decisive measures and more efficient examination by regulators can authorities rebuild investor trust and transparency in the stock market.
