BenQ shares plunge on insider trading probe

Shares of BenQ, the Taiwanese electronics group, fell by the daily limit on Wednesday after it was investigated by the island’s financial regulator over alleged insider trading.

The probe, which was announced following a raid of the company’s offices by prosecutors, delivers another blow to BenQ as it tries to recover from its failed acquisition of Siemens’ handset business.

The company’s stock fell 6.8 percent to NT$13.05 in Taipei as of 10:05 local time on Wednesday, compared with a 1.8 per cent drop in the market’s benchmark index.

BenQ confirmed that prosecutors searched the company’s headquarters in Taipei and offices at its plant in the northern Taiwanese county of Taoyuan on Tuesday afternoon. The company said it had no immediate comment on the case.

Prosecutors took Eric Yu, chief financial officer, and other company officials in charge of finance and accounting, back to their office for questioning. BenQ said it would co-operate fully with the investigators.

BenQ said the raid was related to “overseas employees bonus practices”.

However, the Taoyuan district court prosecutors’ office said its officials were looking for evidence in an insider trading case.

“There is the suspicion of insider trading concerning the sale of more than 6m [BenQ] shares in March last year,” said Chang Chin-feng, a spokesman for the prosecutors’ office.

“The suspicion is that a profit was made by taking the opportunity to sell before BenQ’s announcement of a quarterly loss.”

An official at the Financial Supervisory Commission, Taiwan’s market regulator, said its in-house investigators had looked into “abnormal” transactions at BenQ and transferred the case to prosecutors after finding some hints of insider trading.

On March 14, BenQ announced a T$6bn ($182m) net loss for the fourth quarter of 2005, which it blamed on difficulties in integrating the loss-making handset business it had acquired from Siemens in October 2005.

This triggered a 7 per cent drop in BenQ shares the next day.

In late 2005, BenQ acquired the handset arm of Siemens in an attempt to boost its own-brand handset business. Last September, as the losses incurred at the new subsidiary were growing, BenQ said it would cut off funding to the German affiliate, a move that forced the handset company into insolvency.

BenQ’s share of the worldwide handset market has since been dwindling, and analysts have grown increasingly sceptical about its long-term growth prospects.

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