Zetrix AI faces SC investigation as operational and sukuk pressures mount

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Zetrix AI SC investigation

Highlights

The Securities Commission Malaysia is investigating Zetrix AI, with a visit to its headquarters amid uncertainty over the scope and purpose of the investigation.
Wong Thean Soon's stake in Zetrix AI fell from 29.25% on 1 April to 1.84%, triggering a breach of the RM2 billion sukuk covenant and the risk of default.
Zetrix AI faces potential civil legal action by the government over RM314 million in JPJ revenue arrears, as well as corporate pressures from resignations and changes in senior management roles.

This article was translated from the original. Read the original version by our correspondent here.

Investigation developments and compliance pressures

As reported by The Edge Malaysia, the Securities Commission Malaysia visited Zetrix AI's headquarters in Petaling Jaya as part of an investigation involving the company, according to sources familiar with the matter. The capital markets regulator declined to comment when contacted, while the nature and scope of the investigation, including the purpose of the visit, have not been specified.

The group, formerly known as MyEG Services Bhd, has faced several negative developments over the past two months. These include a sharp drop in its share price after the forced sale of shares pledged by managing director Wong Thean Soon, followed by the suspension of its status as a collection agent for the Road Transport Department over RM314 million in revenue arrears that had not been remitted to the department.

Zetrix AI also disclosed a breach of the RM2 billion sukuk covenant requiring Wong to remain its largest shareholder. Wong's stake, which stood at 29.25% on 1 April, has fallen to around 1.84% following continued forced selling, while the Social Security Organisation is now the largest shareholder, with 216 million shares representing a 2.72% stake.

Implications for financing and corporate governance

Zetrix AI is scheduled to meet its sukuk holders again after failing to reach a resolution over the covenant breach by 22 Oct. A meeting held the day after the deadline also produced no outcome, and the company is planning another meeting. Its sukuk obligations in the event of a payment default total RM2 billion in principal and RM164.5 million in future coupon payments.

Meanwhile, The Edge Malaysia previously reported that Wong was seeking a six-month extension to restore compliance with the shareholding covenant. Last week, the company also offered 788.83 million employee share options at 5.4 sen per share, a 28% discount to Friday's closing price of 7.5 sen. The move could raise around RM42.6 million if fully exercised.

Pressure on the group has also intensified after Transport Minister Anthony Loke Siew Fook told Parliament that the government was taking legal action, including a civil suit, over Zetrix AI's failure to settle outstanding collections and penalties within the stipulated period. The Royal Malaysia Police and the Malaysian Anti-Corruption Commission were also reported to be cooperating and sharing intelligence in connection with the police investigation into the JPJ arrears, while the company said it was fully cooperating and that its day-to-day operations remained unaffected.

On the governance front, independent non-executive director Wong Kok Chau resigned on Monday, citing personal commitments, ending his role as chairman of the audit committee. This followed Datuk Norraesah Mohamad's change of position from executive chairman to non-independent non-executive chairman on 23 Oct. Zetrix AI shares closed at 8.5 sen on Wednesday, valuing the company at RM643.77 million.

In our earlier report on Zetrix AI's suspension as a collection agent for JPJ, we examined how the failure to remit outstanding payments had affected the company's core business and raised questions about its financial position. We also discussed the shift in focus to its blockchain and AI segments, as well as sukuk holders' concerns that the decline in TS Wong's stake had triggered the risk of a breach of the RM2 billion sukuk covenant.

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