Alliance Global injects P2.6-B into Megaworld

Megaworld [MEG 1.89, down 0.5%; 156% avgVol] [link] clarified the recent subscription of its parent company, Alliance Global [AGI 9.30, down 2.8%; 185% avgVol], to 1.375 billion common shares at P1.90/share to say that it is part of a plan to increase MEG’s outstanding authorized capital stock by P5.5 billion (from P40.2 billion to P45.7 billion). MEG explained that it “intends to submit its application for an increase in authorized capital stock... by around June 2024”, and will list the shares issued to AGI once the full payment of the subscription price is received. MEG said that the purpose of the sale and the larger transaction is to “support growth and future business expansions of [MEG] in line with [MEG’s] strategies and directions.”

MB bottom-line: This will give MEG’s management team 4.125 billion common shares that it can sell to fund its ambitious capex for FY24 and beyond. If MEG sold the remainder at the same P1.90/share price, that would bring in an additional P7.8 billion. If I were a shareholder, I’d be less concerned by the details of the transaction as I would be about the meaningless word salad of the rationale behind it. I know many MEG shareholders who are frustrated with the stock’s laggard price performance. MEG just recently touched a 12-year low, and is trading at prices that the stock has not seen since early 2012. It’s down 4% year-to-date, down 8.7% over the past 12 months, down 34% over the past 3 years, and down 69% (not nice) from its all-time high that it set back in July 2019. What’s the plan? So far it seems all I hear is “townships townships townships” but that “strategy and direction” hasn’t been profitable for shareholders for almost 5 years now.

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