What’s the best move for listed companies?

Buyback or delist

MANILA, Philippines — Major listed companies continue to bet on a comeback rather than an exit amid market undervaluation, choosing instead to put their cash where their confidence is through share buybacks.

As Philippine Stock Exchange (PSE) president and CEO Ramon Monzon said, most companies facing market undervaluation pursue one of three strategic paths: optimizing operational efficiency to boost profitability and dividends, launching share buyback programs to support stock prices or giving up and applying for voluntary delisting from the exchange.

Share buybacks, for one, have long been a staple option for listed companies that consider their stocks undervalued or trading at a discount.

However, such buying activity, seen to enhance shareholder value and a reflection of the company’s confidence in its shares, has become more frequent in recent months as share prices continue to weaken.

Just last week alone, companies like Universal Robina Corp., Cebu Air Inc., Fruitas Holdings Inc., SM Prime Holdings Inc. and International Container Terminal Services Inc. continued with their respective share buybacks to support their share prices.

In recent months, Ayala Corp. has also been actively purchasing shares of Ayala Land Inc., with the conglomerate setting aside P5 billion to reaffirm its support to its real estate subsidiary. Ayala Land on its own is undertaking a P10-billion share buyback program in an effort to beef up its share price.

DigiPlus Interactive Corp., chaired by tycoon Eusebio Tanco, extended last July its share buyback program for another year, with an authorized budget of P5.36 billion, while First Philippine Holdings Corp. of the Lopez Group earlier this month announced a P5-billion allocation to buy back shares over two years.

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., believes that buybacks are generally the better option for fundamentally sound companies facing temporary valuation discounts in today’s environment.

“Delisting should be considered only when management sees little prospect of the market eventually recognizing the company’s true value,” Ravelas said.

China Bank Capital Corp. managing director Juan Paolo Colet, meanwhile, said it still depends on the objectives and considerations of the company.

“If a company thinks the undervaluation is temporary and the stock market remains a viable venue for price discovery, fundraising and wealth creation, and assuming there is an ample public float, then a share buyback makes more sense,” he said.

Colet said that by buying back its own shares, a profitable company effectively increases earnings per share by reducing the total number of shares issued.

However, he said that if an undervalued company believes that being a publicly listed company no longer offers any significant benefits, then delisting at a fair price is probably the best means of returning value to public shareholders.

Robinsons Retail Holdings Inc. of the Gokongwei Group, whose shares were delisted from the official registry of the PSE last Aug. 31, voluntarily delisted from the exchange because market valuations no longer reflected the company’s intrinsic value.

Food and beverage company Figaro Culinary Group Inc. recently announced its intent to voluntarily delist from the PSE as well, while MerryMart Consumer Corp. plans to leave the exchange as the company is set to become directly part of the DoubleDragon Group.

Jash Matthew Baylon, equity trader at The First Resources Management and Securities Corp., said share buybacks offer greater overall market support than going private from an investor’s standpoint.

Baylon said undervalued blue-chip companies that sustain buyback programs despite prevailing headwinds help buffer market pessimism by reinforcing confidence and attracting buyers.

“While liquidity may remain constrained in the near term as investors maintain a defensive posture amid geopolitical risks and macroeconomic uncertainty, a broader economic recovery should eventually drive stock performance higher — rewarding investors who accumulate shares at distressed valuations,” he said.

From a company perspective, meanwhile, Baylon said buybacks provide operational flexibility, as programs can be paused or scaled back if conditions worsen.

“In contrast, going private offers distinct long-term strategic benefits, freeing the firm from short-term market fluctuations to focus on underlying growth,” he said.