Construction giant Vinaconex’s shares plummet after court blocks new board

As soon as the stop order was publicized, VCG shares dropped 9.8 percent Thursday, opening at VND28.500 ($1.23) and ending the day’s session at VND25.700 ($1.11).

Its market capitalization also evaporated by VND1.23 trillion ($53.04 million) in the session. Apart from five million shares sold, 1.8 million sell orders were not matched.

The Dong Da District People's Court Thursday passed a temporary emergency injunction forcing Vietnam Construction Consultant and Investment JSC (Vinaconex, stock code: VCG) to stop implementing a resolution to elect a new board of directors and supervisory board for the 2019-2022 term.

The resolution was passed at a general shareholders meeting on January 11 this year.

The injunction was made in response to a petition by two significant shareholders of Vinaconex, Cuong Vu Real Estate Co. Ltd and Star Invest Co. Ltd, which own 21.3 percent and 7.6 percent of Vinaconex’s shares respectively.

According to the Dong Da District People's Court, it had come to decision after reviewing all evidence forwarded by the petitioners, taking into account the legitimate rights of the applicants and business interests of the corporation as a whole. However, it did not elaborate.

Vinaconex's majority shareholder is currently construction contractor An Quy Hung Co., Ltd., which owns 57.7 percent of VCG shares acquired from the State Capital Investment Corporation at an auction late last 2018.

An Quy Hung paid VND7.4 trillion ($319.2 million) for 254.9 million VCG shares, at a price VND1.9 trillion ($81.95 million) higher than market value to obtain all of the SCIC’s 57.7 percent stake.

Industry insiders believe there may have been a conflict of interest between the two parties.

Immediately following the announcement on Thursday, Vinaconex filed an appeal to the Chief Justice of the Hanoi City People’s Court and the Chief Justice of the Dong Da District People’s Court asking to reverse the emergency order.

At the same time, Vinaconex sued related parties for compensation for loss and damage caused to the corporation and its shareholders as a result of the stop decision, including the total $53.04 million loss in the value of its shares.