In continuation of the Hum Network saga that unfolded over the past few months, Stichting General Holdings – a foreign investor in the company – on October 23 wrote a letter to the Securities and Exchange Commission of Pakistan, expressing reservations with the way the management was operating.
Stichting, which is a 13% shareholder in Hum Network, referred to the recent events including the replacing of Central Depository Company as registrar, payments to a related party (MD Productions Ltd), and the sustained decline in the entity’s net income over the past six years even as the management compensation continued to increase.
The foreign investor asked the regulator to reverse the decision of removing as the registrar as well as the “illegal disqualification by the Company of outside nominees for the upcoming director elections”.
It further asked for the appointment of an SECP representative to oversee and conduct future board meetings and in case the upcoming director elections are not held in time, the naming of an administrator to run Hum Network until the new board can be appointed.
More worryingly, it warned that the “unfortunate situation is creating a very poor global image of Pakistani capital markets. Should the illegal abuse of minority shareholders be allowed to continue unpunished, it will most certainly cast doubt upon the suitability of the Pakistani market for prospective international investors.”
Remember that months ago, it was Kingsway Capital – the second-largest shareholder in Hum Network as of June 30 – that started aggressively buying the stock, which a local media outlet attributed as part of a hostile takeover to oust the current management. During the end of the same period, Stichting General Holdings had the second-biggest stake in the company, with the two international investors making up a total of 33.94%.
Stichting also mentioned its own history of investing in Pakistan, including Packages Ltd and Pakistan Tobacco Company. “In these instances, we were supportive shareholders who allowed management to achieve their objectives without unnecessary interference from us. We intended to replicate this supportive approach with Hum and its management, as demonstrated by the fact that we previously gave our proxy vote to its CEO on multiple occasions. As noted in our last letter, the appalling management of the CEO and the Board, now compounded by the events of the last two months, leaves us with little choice but to exercise our right to consider alternative directors,” the document added.
We are still awaiting a response from HUMNL’s largest shareholder and CEO Duraid Qureshi and will update the story once received.