What to do with treasury shares?
Emeterio Sd. Perez
PRIME Orion Philippines Inc. (POPI) has authorized capital stock (ACS) of 7.5 billion common shares with par value of P1 per common share, according to a general information sheet (GIS).
Of the company’s ACS, 792 Filipinos subscribed to 4.875 billion POPI common shares which is equivalent to 99.025 percent of 4.923 billion outstanding common shares.
(Note: The computations are based on numbers which were shortened to three decimal points. Thus, Filipinos’ subscription to 4.875 billion POPI common shares plus 48,434,677 POPI common shares subscribed by foreigners equals 4,923,084,883 or 4.923 billion POPI common shares.
(Due Diligencer rounded off the numbers by treating 0.5 plus one as 1.)
In its GIS, Prime Orion also reported that 13 foreigners subscribed to 48.435 million POPI common shares which was the same number of POPI common shares classified as paid-up capital.
On the other hand, 792 Filipinos had paid-up capital for 4.604 billion POPI common shares of their 4.875 billion subscribed POPI common shares.
In summing up its capital stock, POPI arrived at total paid-up capital of P4.652 billion which is the total of Filipinos’ paid subscribed POPI shares and foreigners’ P48.435 million.
Additional paid-in capital
In its GIS, Prime Orion reported total capitalization of P8.595 billion which is the sum of total paid-up capital of P4.652 billion and additional paid-in capital (APIC) of P3.952 billion.
APIC refers to payments by stockholders over par value. In the case of POPI, its APIC as of the date of GIS filing amounted to P3.942 billion. Thus a total capitalization of P8.594 billion ( P4.652 billion plus P3.942 billion APIC).
Due Diligencer has yet to get an update on how the Securities and Exchange Commission (SEC) would apply the use of APIC in the capitalization of listed companies.
As regulatory authorities, the SEC’s five-person body has made it a general rule that APIC are declarable only as stock dividend but applicable to the amounts of deficits in case of insolvency.
In its 2018 second quarter report, POPI had 6.148 billion outstanding common shares, which at the stock’s last trade of P2.87, should have market value of P17.645 billion.
In the same consolidated financial filing, POPI reported outstanding capital of P5.879 billion and APIC of P5.748 billion. In getting the average per POPI common share, add P5.879 and P5.748 to get P11.627 billion. Divided by 5.879 POPI common shares, the answer is P1.978 per POPI common share.
Buyback
Public investors should watch managements of listed companies engaged in buying back their own listed common shares.
As posted on the website of the Philippine Stock Exchange (PSE), Belle Corp. said it has earmarked P3 billion to reacquire Belle’s listed common shares.
As of Aug. 10, 2018, the company said it “has repurchased from the market a total of 735.554 million Belle common shares at P3.1208/share or a total cost amounting to approximately P2.3 billion.”
In its PSE posting, Belle, through Tristan B. Ochoa, VP-Investor Relations, added it “funded the purchase through internal sources.”
In summary, Belle said it has repurchased to date 797.874 million Belle common shares and spent P2.477 billion.
Belle also informed its stockholders that its outstanding common shares dropped to 9.763 billion common shares from 10.499 billion common shares.
By buying back its own common shares in the open market, the company’s treasury shares also increased to 797.874 million common shares from 62.32 million common shares.
The disclosure was filed on behalf of Belle by Elizabeth Tan, manager, governance & corporate affairs/investor relations.
Due Diligencer’s take
The suggestion is for the public to be wary of listed companies that buy back their own listed common shares.
What could possibly happen to them when they continue selling without anticipating the listed companies’ plan for the common shares they repurchased?
Do the owners, who are the controlling stockholders, plan to resell them to the public at much higher prices?
If not, then the best thing for listed companies which buy back their own listed common shares is to reduce their authorized capital stock to reflect the number of treasury shares they had accumulated.
In the first place, how did some listed companies get so much APIC if they hadn’t engaged in reselling treasury shares?
The public investors may be in the market to make money. Yet, they shouldn’t be manipulated by managements that resell to them the listed common shares they had repurchased.
It’s only fair that, instead of reselling treasury shares, listed companies must reduce their capital stock to reflect the number of common shares they bought back.
After all, business owners of listed companies owe the public investors for enabling them to make their stock corporations listed but not necessarily public.
Will Belle sell back what it has as treasury shares? Just asking.
esdperez@gmail.com
The post What to do with treasury shares? appeared first on The Manila Times Online.