Tanco’s share price collapse is not ‘odd’, it’s catastrophic

The shares of Tanco Holdings Bhd have been on a meteoric rise over the past two years. Since the start of 2024 when it was trading around the 25 sen level, its shares have rallied 600%, hitting its all-time high of RM1.78 on June 3 this year.

Since that peak, the property developer has fallen off a cliff in spectacular fashion. In just nine trading sessions, it has plummeted 93% to its intraday low of 12 sen on Tuesday.

On Monday, in a bid to reassure shareholders and investors, Tanco issued a statement describing the share price fall as “odd”.

“The recent, rapid and unprecedented share price fall appears odd, given that all of Tanco’s fundamental businesses, along with its major projects and contracts, were sound and intact,” it said in the statement.

That surely must be the understatement of the year, at least within Malaysia’s corporate circles. The crash in its stock price is not odd, it is catastrophic.

The plunge has wiped nearly RM10 billion off its market capitalisation. The group was valued at about RM10.8 billion when it closed off its all-time high on June 3. The stock closed at 15 sen on Tuesday, valuing the company at RM920 million.

It is not only the massive drop in its valuation but also the speed of the collapse that has shocked investors. It took less than a fortnight for Tanco to give back all the gains it accumulated over more than two years. The puzzling thing is that there appears to be no clear reason for the monumental crash.

Responding to Bursa Malaysia Securities last week after its second unusual market activity (UMA) query in two months, Tanco said it was not aware of any undisclosed corporate developments, rumours, or other factors that could explain the trading activity.

In its statement yesterday, the company assured shareholders that its business operations, property development, and contractual obligations remain unaffected.

The rise of Tanco, a small and low-profile developer, saw it joining the ranks of the biggest listed developers on Bursa Malaysia. It even briefly nudged Sime Darby Property Bhd from its position as the second largest listed developer by market capitalisation, behind IOI Properties Group Bhd.

A large dose of scepticism

However, Tanco’s surge up the property leaderboard has been met with a large dose of scepticism by investors and industry observers.

Five years ago, at the beginning of 2021, the stock was trading just under 2 sen per share. This means it has surged 8,800% from that price to its all-time high just two weeks ago.

There does not appear to be any fundamental reason for such a mind-boggling rise in its share price and market valuation.

Tanco had been loss-making for a decade since its financial year ended June 30, 2013 (FY2013) before it finally returned to the black three years ago. Even then, its earnings since have been mediocre, to say the least.

For FY2025, net profit fell 33.8% to RM7.88 million from RM11.9 million the previous year, as revenue dropped 26% to RM128.46 million from RM173.53 million.

The only development that has generated some interest has been its proposed development of a smart AI (artificial intelligence) container port in Port Dickson, Negeri Sembilan, known as Midport.

However, it is unclear how Tanco will fund the port’s construction cost estimated at around RM3.53 billion, and when the project will take off.

Tale of the foolish investor

Meanwhile, its largest shareholder and group managing director Andrew Tan has been actively buying and selling the company’s shares in recent times, according to Bursa Malaysia filings.

On June 9, Tan disposed 24.62 million shares, leaving him with a direct stake of 18.73% and an indirect stake of 34.62%, through his private investment vehicles.

However, this disposal via a direct business transaction caught the attention of investors and the media as it was sold at a premium on a day when the shares were crashing.

Eyebrows were raised that the transaction price of RM1.555 was 48.6% higher than the closing price of 80 sen.

The party which bought the block of shares at RM1.555 forked out RM38.3 million when they could have paid RM19.7 million at 80 sen, or just RM2.9 million at 12 sen currently.

Buying the shares at an exorbitant premium when all hell is breaking loose, and the share price is falling like a rock, was certainly catastrophic for that foolish investor.

The views expressed are those of the writer and do not necessarily reflect those of FMT.