DigiPlus drops fresh P6-B buyback program

DigiPlus [PLUS 33.80, up 14.6%; 332% avgVol] [link] announced a repurchase program of up to P6 billion worth of the company’s common shares over the next 12 months. The buyback is about 4.5% of its P133.6 billion marketcap. The Eusebio Tanco-led operator of BingoPlus said the share repurchase program will be funded through its “internally generated cash flows”. It added that the move underscores the company’s “healthy balance sheet and resilient operations” despite suffering from a sell-off triggered by proposed legislation seeking tighter regulations on online gaming.

MB bottom-line: I’m sure there are thousands of PLUS bagholders out there who were happy to hear that reinforcements are coming. A couple of those bagholders may have even voted to approve the buyback at the company’s last board meeting. Who stands more to gain from using shareholder money to prop up the price? Theoretically, all shareholders stand to gain. The artificial demand from the buyback program will help soak up the sell orders from panicking shareholders and help drive the price upward once those sales have been exhausted. But imagine you were just granted a massive pile of shares through a stock option plan that are worth 50% less than they were just a couple of weeks ago. What’s the quickest way to reduce the negative impact of selling those shares? This is a win for everybody, but for some more than others.

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