Phinma locks in gains via sale of treasury shares

LISTED holding firm Phinma Corp. announced that it sold 13.6 million of its treasury shares through the Philippine Stock Exchange at P19.50 apiece.

“The proceeds from the sale will be used for investments and for general corporate purposes,” the company said in a disclosure on Monday.

The company started selling its treasury shares back on July 19 after its executive committee approved the issuance on May 31.

Phinma was authorized to sell 14.45 million treasury shares with the shareholders approving a one-time denial of preemptive rights.

Unicapital Securities, Inc. Equity Research Analyst Ralph Jonathan B. Fausto said in a Viber message that the sale of treasury sales “is viewed to be the realization of its previous share buyback program.”

“They locked in their gains after the stock price appreciated and reached a price that the company thinks is the fair value of their stock,” Mr. Fausto added.

Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., said that “the sale of treasury shares would allow greater ownership of shares by the investing public, while allowing the increase of the listed firm’s capital.”

“When the shareholders decide to deny their preemptive rights, it means that the existing shareholders are not given the right of first refusal or their right to exercise the option to have priority to subscribe to the shares, avoiding dilution of their current stake in the company,” Mr. Fausto said.

He added that in the case of Phinma, shareholders will still have the opportunity to acquire treasury shares in the open market to retain their current ownership in the company.

The treasury shares represent 5% shareholding interests and after the transaction, treasury shares of the company are now at 751,279.

Its outstanding shares are now at 285.59 million from 271.99 million before the transaction.

Mr. Fausto said that companies usually buy back their shares and put them in their treasury when their price falls below their expectations.

“Once the share price appreciates and reaches the fair value they consider the stock is worth, this is usually the time when we see companies sell their previously purchased own shares through their buyback programs,” he added.

Meanwhile, Mr. Ricafort said that “companies sell their treasury sales as a way to raise new funding [though] the dilution of existing shareholders may not be that much, as a result.”

On the stock market on Monday, Phinma shares climbed by four centavos or 0.20% to P19.94 apiece.