More companies make moves to de-list shares as market stalls
Sai Gon Beverages Co (TRI) and Descon Construction Corporation (DCC) are two of the latest companies seeking shareholder approval to cancel listing of the companies' shares.
They join Mekophar Chemical Pharmaceutical Co (MKP), Interfood Shareholding Co (IFS), Sai Gon Telecommunications and Technologies (SGT), Sai Gon-Quy Nhon Mining (SQC), Viet Nam Construction Co No 11 (V11), and Song Da No 27 (S27), among other companies cancelling plans to list.
As more listed companies consider or decide to exit the stock market, reversing the trend of just a few short years ago of companies racing to list, what are the reasons behind the shift?
SGT and SQC attributed their decision to difficulties in raising capital via the stock market with the steep decline in share prices negatively affecting their corporate images. MKP was unable to conduct retail operations in the field of pharmaceuticals due to foreign ownership, while V11 planned to restructure.
DCC, TRI and IFS have not publicised their reasons, but, according to market insiders, prolonged unprofitability has forced them to stay behind the scenes.
The director of the Research Institute of Informatics and Applied Economics director, Dinh The Hien, said these reasons were not really convincing.
"This doesn't depend on the general market trend, but on the investors," Hien said. "In a downturn, most shares decline, but that doesn't mean that investors can't properly evaluate the shares they are holding."
Hien said many investors would opt to hold onto their shares and await a recovery.
Some ostensibly profitable companies have also begged off from listing on the stock market, saying they did not have any demand to raise capital in the immediate future and that leaving the stock market would actually help them save some costs.
The director of a plastics company, which makes a yearly profit of VND80-100 billion (US$3.8-4.8 million) on total charter capital of just VND150 billion ($7.1 million) and pays a cash dividend from 20-40 per cent per year, told Dau Tu Chung Khoan (Securities Investment), "We are considering to exit the market because the number of our outstanding shares on the market is small while the daily trading volume is only a few thousand shares. A group of major shareholders proposed to re-calculate the efficiency of listing."
The fact that over half of all shares are currently being traded under their par value on both of the nation's stock exchanges has made many smaller firms easy targets for takeovers. In theory, a group of investors with only VND25-30 billion ($1.2-1.4 million) could own cotrolling stake of a company with charter capital of VND100 billion ($4.8 million). In face of this risk, some firms see cancelling their listings as a defensive move.
"Each company has its own difficulties, but it took them a lot of time, effort and financial cost to list shares on the stock market," said Nguyen Phuc Thinh, director of the Corporate Finance, Research and Planning Division of Hoa Binh Securities Co. "They will therefore consider carefully before making any move to de-list."
Independent analyst Pham Viet Hung agreed that a lot of shares were under valued now but said that such ups and downs were normal on a stock market. The best way to support stock prices, he suggested, would be to improve corporate transparency, not turn their backs on the market.
Those who opted to leave the market would lose credibility in the eyes of investors, particularly foreign investors, and this would cause them more difficulty later in raising capital when they need it, Hung said. — VNS