Happy Thursday, Barkada --
The PSE closed up 23 points to 6943▲0.3%
A huge shout-out and humbled thank-you goes out to our new "Ministop Coffee Crew" patron,
Miguel. Thanks for the coffee,
Miguel! I can use it this morning.
(sleep training the baby through teething is... interesting)
Thank you to
Clyde for the compliment (describing MB as a "reliable news source"), to
Novei for the good vibes and the question on stock dividends (answered below), to
₿elle, CBE™ for the meme love and the compliments, to
JD1026 and
Gio for the primer appreciation, and to bilyonaryo
Antonio L. Tiu (林江揚) for liking a few of my tweets (about GREEN, naturally). Haha!
Shout-out to
/@stevenbelievin,
/@godismyredeemermyrock,
/@rebeccajoy72,
/@jssusislord, and the anonymous redditors for the Reddit awards, and to
Chip,
calbo,
Daniel Goalman, and
JD1026 for the retweets!
Top 3 MB indices:
Code:
Power Gen. ▲0.88%
Cement ▲0.66%
D30 Targets ▲0.55%
Bottom 3 MB indices:
Code:
MiddleClass ▼1.23%
#COVID-19 ▼0.72%
2019 IPOs ▼0.37%
Main stories covered:
- [NEWS] Premiere Horizon Alliance [PHA 2.96 ▼5.73%] halted after shares distributed to Squidpay shareholders... the PSE slapped a 1-hour trading halt on PHA after the exchange considered PHA’s disclosure to have been an “Additional Listing of Securities”. The disclosure said that PHA’s board had voted to issue 2,539,393,939 common shares to Marvin Dela Cruz and his crew of Squidpay shareholders, to issue 303,030,303 common shares to some creditors, and to issue 557,142,857 common shares for the conversion of a convertible loan. The loan shares were issued at a price of ₱0.70/share, whereas the 2,842,424,242 shares to Squidpay people and creditors were issued at ₱0.25/share.
- MB: Seeing as how PHA only has 1,815,480,889 common shares listed right now, the additional 3,399,567,099 common shares as voted by the board seems like a pretty significant 187% increase. You’d expect to see the shareprice take a dive, as this move signals pretty significant dilution.
- [NEWS] Abra Mining and Industrial [AR 0.00 ▼14.81%] suspended indefinitely for selling shares in violation of PSE rules... the basura darling was smacked by the PSE late last night with an indefinite suspension after the exchange discovered that: (1) AR’s fully-paid and outstanding shares exceeded its listed shares (PSE rules require fully-paid/outstanding shares to be listed), (2) the number of shares lodged with the Philippine Depository and Trust Corp (the market settlement agent) exceeds the number of listed shares (PSE rules require that only shares approved for listing be lodged with PDTC), and (3) AR lodged more shares with the PDTC than it has reflected in its books and audited financial statements (violation of Revised Corporation Code). The PSE said that the suspension would remain until these issues were resolved.
- MB: What a damn mess. And just a day after AR was asked to explain the unusual price movement from ₱0.0036 to ₱0.0054, to which it replied that it simply “cannot speculate” as to the reason for the 50% increase. I wonder what AR would say if it were asked to explain yesterday’s 14% drop, or whatever is to happen next to this stock once the dust settles and all the penalties/sanctions are meted out? You can check this Bilyonaryo article for more color on the story. This kind of oversight is very important to the integrity of the markets that we invest in. I applaud every attempt by the regulators to hold companies accountable for rules violations, if any, and to investigate aggressively anything that seems off. Regards to any basuraneros that unwittingly got caught up in this, but that can be an occupational hazard when dealing in this area of the market.
- [UPDATE] Da Vinci Capital Holdings [DAVIN 6.50 0.00%] suspension to be lifted Friday morning... the stock was originally suspended on February 24 for transactions with Cosco Capital [COSCO 5.60 0.00%] that the PSE deemed to have triggered the Backdoor Listing Rule, pending comprehensive disclosure from DAVIN on the subscription by Invescap and the share swap between DAVIN and COSCO. In a notice to the market, the PSE indicated that DAVIN had satisfied the exchange with its subsequent disclosures and that the suspension would be lifted before trading on Friday.
- MB: This was about Lucio Co’s spin-off of his various liquor companies into DAVIN that were previously held under COSCO that MB covered a couple of weeks ago. Since both companies are owned by Lucio Co I don’t expect there to be any procedural hiccups as the parties hit their milestones in the transaction, but be on the lookout for a tender offer
- [LEARN] What’s the deal with stock dividends?... our reader Novei asked her question about Italpinas Development Corporation’s [IDC 2.77 ▼3.15%] recent declaration of a stock dividend, and more specifically, what it meant for IDC to declare a 45% stock dividend. Great question! The dividend rate is just the amount of stock that you’d receive relative to the amount of stock that you already own. So in IDC’s case, a stock dividend rate of 45% means that you would get 0.45 shares for every 1 share, or to put it more nicely with whole numbers, you’d get 45 dividend shares for every 100 shares owned. Cebu Landmasters [CLI 5.40 ▼2.53%] recently declared a 123% stock dividend, and the math works the same: shareholders will receive a dividend of stock that is equal to 123% of their current holdings, or 123 dividend shares for every 100 shares owned. Novei’s follow-up question is also a great one: Is a stock dividend just basically like a stock split, then? The answer is... mostly. The end outcome is the same in terms of the stock price and the number of shares if a company declares a 100% stock dividend or a 2-for-1 stock split; the number of shares will double, and the “extra” shares are all given to the existing shareholders of record. The difference (and there is a difference) is in the accounting of the move. I’m not an accountant, but take a look at this great writeup for an explanation of how a stock dividend differs from a stock split in terms of the journal entry needed to make the dividend happen by moving money from retained earnings to paid-in capital.
- MB: Since a stock dividend doesn’t really change anything with respect to a shareholder’s relative holdings, it’s not really clear why IDC or CLI elected to go with the stock dividend... except that, perhaps, it was an easy way for the companies to trim their retained earnings without having to distribute a cash dividend during a pandemic when cash might be a premium asset and cashflows are tight. Or maybe both companies want to make their share prices seem cheaper to retail investors, and are using stock dividends to drive down the price of the stock (but not the value or the gain/loss of investors)? I don’t know. Would love to be a fly on the wall during the board meetings. Has anyone been involved in a stock dividend declaration before? Contact me with your take!
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