Stark Corporation is poised to be delisted from the Stock Exchange of Thailand (SET) due to its negative shareholders' equity, while the Securities and Exchange Commission (SEC) is vowing to take legal action against those involved in preparing the company's faulty financial statements.
Stark submitted the audited 2022 financial statement to the SET on June 16, which showed its shareholders' equity of 2021 and 2022 was negative, at nearly 2.9 billion baht and 4.4 billion baht, respectively, the bourse said in a statement on Monday.
"Stark's securities are subject to possible delisting because of its negative equity from June 19 onwards," said the statement, adding that Stark must disclose its process for eliminating the grounds for delisting due to negative equity, including the timeline for informing shareholders and investors, by July 19.
"Stark must process urgently to eliminate the grounds for delisting as the equity is negative within three years from June 19. When the deadline is due, if the company is still unable to eliminate the grounds for delisting, SET may consider delisting the company's securities," the SET noted.
The SET will post a NC (non-compliance) sign on Stark's securities and the shares would be suspended from trading from July 1 until the company is able to eliminate the grounds for delisting and possess the qualifications for the resumption of trading, it added.
"SET recommends investors trade Stark's securities with caution and carefully study the company's financial statements, the auditor's disclaimer of opinion on its financial statements, summary of special audit results, and any other information related to Stark."
Meanwhile, the SEC is preparing to "take legal action against the perpetrators of the Stark case", the regulator said in a separate statement.
The SEC said it has urged the directors of Stark to quickly solve problems that occurred in the company and to disclose relevant information. This included the prompt preparation and submission of all outstanding financial statements, and the SEC instructed Stark to immediately expand the scope of the special audit to cover a number of important matters.
Stark later submitted the financial statements for 2022 on June 16, disclosed the results of the first phase of its special audits, and requested an extension of the period for disclosing all special audit results for an additional 30 days.
"From the auditor's audit report, the auditor did not comment on Stark's consolidated financial statements on various issues and the results of the first phase of the special audit, which showed abnormal sales data and irregular inventories, while the debtor ageing analysis report was incorrectly prepared with advance payments for unusual goods," said the SEC.
The regulator has thus proceeded to investigate the violations in accordance with the Securities Act.
"If any person is found to be involved in the offence, the SEC will take legal action according to the process and will coordinate with relevant agencies for cooperation on this matter," the SEC noted.
Pichai Lertsupongkij, deputy managing director of Thanachart Securities, said the Stark case required prompt action from the regulators in order to minimise the potential impact caused to investor confidence in the Thai stock market overall.
"So far, events related to Stark affected investors' confidence only in terms of the company and its securities. However, concerned agencies must urgently find and bring those related to faulty financial statements, including inflated revenue and fake orders, to justice," said Mr Pichai. "If that can be done in timely manner, confidence can be restored."