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Stock Commentary

Globe sets SRO price at 20% discount to current price

Philstar.com
Globe sets SRO price at 20% discount to current price
This kind of SRO definitely benefits significant shareholders more than it does retail minority holders. That’s not necessarily a bad thing, It’s just what happens when an entitlement ratio is large and the underlying stock price is significant.
Merkado Barkada

Globe Telecom [GLO 2090.00 1.60%] [link] set its stock rights offering (SRO) price at P1,680/share, with an entitlement ratio of 1 SRO share for every 13.2366 existing GLO shares owned. GLO will sell 10,119,047 shares and raise P17 billion through this transaction.

While the price is at a 20% discount to GLO’s closing price on Friday, the SRO price represents a 22.6% discount from GLO’s 30-day volume weighted average price, as calculated on September 8th.
 

MB BOTTOM-LINE

The discount is on the higher-end of the range provided by GLO (15-25%), but participation will not come “cheap”.

With an entitlement ratio of 1:13.2366, that means that even if you owned 1,000 shares of GLO (worth P2.09 million as of Friday’s close), you’d only get the chance to buy 75 SRO shares.

You’d pay P126,000 for those shares, which would be worth P156,750 at market.

You’d get about P30,000 of value off of P2 million in shareholdings.

This kind of SRO definitely benefits significant shareholders more than it does retail minority holders. That’s not necessarily a  bad thing, It’s just what happens when an entitlement ratio is large and the underlying stock price is significant.    

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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.

GLOBE TELECOM INC.

PHILIPPINE STOCK EXCHANGE

SRO

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