DIG shares (Investment and Construction Development Corporation; HoSE: DIG) were extremely volatile during the August 28th trading session. Specifically, during the morning session, DIG shares were severely sold off, leading the stock price to hit the floor at moments and plummet roughly 7%.

However, by the afternoon session, the fall was shrunk to 4.7%, with the share price exceeding 23,800 VND per share. By the end of the trading day on August 28th, DIG shares had declined about 4%, to 24,050 VND per share.

In addition to the dramatic decrease in stock price, the liquidity of DIG shares increased significantly during the August 28th trading session, with approximately 42 million shares exchanged, corresponding to a total transaction value of over 1 trillion VND, more than double the previous week's average trading volume.

Domestic investors were not the only ones selling DIG shares substantially today; international investors also sold 668,100 DIG shares, totaling more than 16.3 billion VND.

The fluctuations in DIG shares are considered an immediate reaction following the issuance of Notice No. 1764/TB-TTCP by the Government Inspectorate on August 27th regarding “Compliance with laws in the equitization and divestment of state capital at Investment and Construction Development Company (now Investment and Construction Development Corporation - DIC Corp).”

According to the Government Inspectorate's findings, the equitization of the Investment and Construction Development Corporation and the divestment of state capital at DIG followed the Government's policies and regulations, as well as the Prime Minister's directives. The Ministry of Construction actively watched DIG's equitization and state capital disposal process, which yielded significant results by mobilizing resources from multiple economic sectors to improve the enterprise's financial capability and operational efficiency.

The equitization and divestiture processes ensured timely development in accordance with government policy and Prime Minister orders. However, despite the obtained outcomes, there were significant limit ations and inadequacies during the equitization and divestiture procedures, such as:

First, consider the legal grounds and methods for equitization. The Ministry of Construction developed the equitization plan on the legal basis of Decree 187/2004/ND-CP, which did not conform with Clause 2 of Article 56 of Decree 109/2007/ND-CP. The Ministry of Construction's Decision No. 1094/QD-BXD, which approved the valuation of the equitized enterprise based on the results of the enterprise valuation assessment by the Ministry of Construction's Financial Planning Department without the verification of the Equitization Steering Committee, violated the Ministry of Finance and Government regulations.

The Government Inspectorate stated that these limit ations, shortcomings, and violations led to certain procedures and steps not being carried out in accordance with the provisions of Decree 109/2007/ND-CP and Circular 146/2007/TT-BTC of the Ministry of Finance, such as: The Investment and Construction Development Company did not develop a land-use plan; the value of the geographical advantage of leased urban land was not calculated into the enterprise's value.

The Ministry of Construction issued Decision No. 687/QD-BXD on July 13, 2016, approving the state capital value as of 0:00 on March 13, 2008, for the handover of the state-owned enterprise: The Investment and Construction Development Company to DIG, which did not meet the time requirements as stipulated.

Secondly, regarding the valuation of assets as construction works on land. The consulting unit, Vietnam Inspection and Appraisal JSC (VIVACO), incorrectly determined the investment cost and original price of two construction works on land, leading to a deviation in asset value by 2.4 billion VND less than the stipulated value.

Third, regarding the valuation of land-use rights. VIVACO did not revalue the land-use rights for 25 villas in the Phuong Nam Villa area, which was not in compliance with Article 19 of Decree 187/2004/ND-CP and Article 6 of Decree 17/2006/ND-CP. However, the revenue from the transfer of 14 out of 25 villas after January 1, 2007, was recorded in the financial results of the state-owned enterprise as required; the remaining 11 villas were later assessed by the State Audit Office to determine additional land-use fees, which the Investment and Construction Development Company paid into the Enterprise Restructuring Support Fund after the Ministry of Construction issued a decision approving the state capital value as of 0:00 on March 13, 2008, for the handover of the state-owned enterprise to the joint-stock company.

VIVACO and the Ministry of Construction did not revalue the land-use rights for the Dai Phuoc Eco-Tourism Urban Area project, instead using the aggregated investment cost and project development rights value in the enterprise’s equitization value, which was not in compliance with Article 6 of Decree 17/2006/ND-CP.

Fourth, about financial management during the interval between the enterprise's valuation and its official conversion to a joint stock company. Clause 4, Article 21 of Decree 109/2007/ND-CP states that if the actual value of state capital decreases between the time the enterprise converts to a joint-stock company and the time of valuation, the equitized enterprise must report to the competent authority and coordinate with relevant agencies to clarify the reasons, determine the responsibility of the collective or individuals involved, and take appropriate action.

However, during the state capital settlement process, the Investment and Construction Development Company recorded the losses of three subsidiaries (from the time of equitization valuation to the time of conversion to a joint-stock company for these subsidiaries), which had been approved by the Ministry of Construction as part of the state capital value as of 0:00 on March 13, 2008, for handover.

Fifth, regarding private placement of shares. The Ministry of Construction issued Document No. 2023/BXD-ĐMDN on September 23, 2009, and Document No. 2128/BXD-ĐMDN on October 2, 2009, approving the plan to issue and privately place shares to increase charter capital, thereby directing that the private placement price should be appropriate to the market price at the time of issuance. The Board of Directors submitted to the DIG General Meeting of Shareholders to decide on a minimum selling price of 100,000 VND per share, and the Board of Directors of the Corporation offered shares at 100,000 VND and 102,000 VND per share. However, the Ministry of Construction, in its role as the owner, did not fulfill its responsibility in directing the private placement price in 2009 and needs to be reviewed and handled according to regulations.

Sixth, regarding the procedures for divestment and the valuation of shares for state capital divestment. The Ministry of Construction issued Document No. 2649/BXD-QLDN on November 7, 2017, approving the state capital divestment plan at DIG without consulting the Ministry of Finance and the Ministry of Planning and Investment, which did not comply with government regulations.

DIG provided incomplete information, leading the consulting unit to fail to revalue the land-use rights of three land locations to ensure consistency with the market value at the time of share valuation. The total amount not valued at market price for the share valuation was estimated at 1,821 VND per share, bringing the estimated share value to 14,251 VND.

However, the consulting unit's valuation result and the historical trading price of DIG shares on the stock market were referenced by the Ministry of Construction, which determined the minimum share sale price to be 15,000 VND, higher than the consulting unit's valuation (12,430 VND); the executed transaction price on the Stock Exchange was 19,250 VND per share, higher than the price determined by the Ministry of Construction; according to regulations on the methodology

Given these shortcomings and violations, the Chief Government Inspector has recommended that the Prime Minister instruct the Ministry of Construction to determine the appropriate disciplinary actions against the collective leadership of the Ministry during the periods 2007-2008 and 2016-2017, and against the organizations and individuals involved in the aforementioned limit ations and violations outlined in the inspection report.

Instruct the relevant organizations and individuals to rectify the amount of money in violation regarding the valuation of assets on land as mentioned in Appendix No. 03 attached to the inspection conclusions; determine the causes of losses at DIC No. 1 JSC, DIC Building Materials JSC, and DIC Tourism JSC to take appropriate actions for the losses accounted into the state capital value at the Investment and Construction Development Company in accordance with regulations; clarify the direction on the private placement price of shares in 2009; review and clarify the failure to revalue the land-use rights of three land locations during the share valuation process for state capital divestment at DIG.

Preside and coordinate with the People's Committee of Dong Nai Province to review the valuation of the land-use rights for the Dai Phuoc Eco-Tourism Urban Area project. If the revalued land-use rights are lower than the aggregated investment cost and project development rights value calculated into the enterprise’s equitization value, it should remain unchanged; if higher, the additional amount should be paid into the state budget.

“During the review, inspection, and rectification of the aforementioned limit ations and violations, if any signs of criminal law violations are detected, the Ministry of Construction should forward the information to the investigation agency for appropriate handling,” the Government Inspectorate recommended.

Immediately after the trading session on August 28th, DIG issued a press release regarding the Government Inspectorate's conclusions on the equitization and state capital divestment at the Corporation.

Regarding certain contents of the Inspectorate's conclusions, DIC Corp’s press release identified the implementation timeline for all recommendations & Conclusion No. 1288/KL-TTCP as follows:

Regarding the completion of financial obligations, DIC Corp will pay 2,467,707,028 VND for violations in the asset valuation on land as stated in Appendix No. 3 attached to Conclusion No. 1288/KL-TTCP before September 25, 2024.

Regarding the review of organizational and individual responsibilities, DIC Corp will coordinate with the Ministry of Construction to conduct an administrative review according to the Inspectorate's conclusions before September 25, 2024.

From a corporate perspective, DIC Corp recognizes that the inspection activities of the Government Inspectorate, in particular, and state agencies, in general, contribute to helping enterprises build and strengthen their governance and management systems according to the Party, State, and Law’s policies.