PSE plan to hike capital base gets board OK

The Philippine Stock Exchange is seeking ways to boost its capital base significantly to cover a stock dividend declaration and, perhaps, prepare for its plan to engage in merger and acquisition activities in the future.

In a disclosure to the Philippine Stock Exchange on Thursday, the PSE said its board had approved an increase in its authorized capital to 120 million shares from 97.8 million with a par value of P1 per share.

At least 25 percent of the increase in authorized capital will cover a 20-percent stock dividend declaration to stockholders equivalent to 12.21 million shares.

The stock dividend declaration is worth P5.51 billion based on Thursday’s closing price of P451 per share.

Dividends will be payable within 30 days from the approval of the increase in the PSE’s authorized capital base by the Securities and Exchange Commission.

The PSE has so far issued only 61.26 million out of its 97.8 million authorized capital stocks. This means it still has a leeway to cover its latest stock dividend declaration.

Given this, some quarters see the PSE preparing to use its own stocks as a currency for future fund-raising or prospective M&A transactions.

“I find it a little funny. The exchange can easily issue dividends out of its current capital, why does it have to increase capital? This could be a preparation for possible M&As or placements from other exchanges or other interested parties,” said Joseph Roxas, president of Eagle Equities Inc.

“They have prepared for stock dividend issuance plus the entry of potential new investors should any deal materialize,” said Jose Mari Lacson, head of research at Campos Lanuza & Co.

At current prices, the PSE has a market capitalization of P27.65 billion. Based on its existing authorized capital, it has the leeway to raise as much as P16.7 billion from the issuance of new additional shares. The increase in authorized capital equivalent to 22.2 million common shares currently sought by the PSE is worth another P10.14 billion based on current prices.

The PSE’s stockholders will have to ratify the increase in authorized capital stock and the declaration of stock dividends during the annual stockholders meeting on May 18.