Dayang: The importance of share price

On 17 May 2019, the company first announced its intention to place out not more than 10% of its total issued shares. 

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On 10 Feb 2020, the company submitted an application to Bursa Securities for an extension of time of up to 26 Aug 2020 to complete the implementation of private placement of 96,480,983 shares.  

When investors see the above 2 company announcements, they would have the wrong impression that the company is so short of money to do business. The company must be so desperate for more money that is why it has to apply for extension of time to find buyers for the placement shares. 

If the company could not find buyers for the placement shares when its share price was about Rm 1.00, how can it expect to find buyers when its share price has gone up nearly 300%? Based on the company’s revenue and profit improvement in the last few quarters, it is most likely the price will be higher and not lower than the current price in the next few months. 

An exercise in futility: The application for time extension to find buyers for the 96,480,983 placement shares is completely hopeless. It is an exercise in futility. Moreover, all these share placement announcements have been depressing the share price. Otherwise the price could have gone up even higher. The company should withdraw its time extension application to save some dignity.  

The duty of all company directors

The directors are paid by the shareholders to manage their money efficiently. Their most important duty is to make profit to benefit the shareholders. But they cannot give out all the profit to the shareholders because the company needs more money to do more business to make more profit. 

The most amicable solution:

If the company cannot or should not give out all the profit to all the shareholders the most amicable solution is to give out a small portion of the profit as dividend and find ways to improve the share price. 

The importance of share price:

The company board of directors must realise the importance of the share price to all the shareholders. When an investor buys a share, he expects to gain from dividend and share price increase. Almost all the listed companies in Malaysia give out poor dividend, not more than 5% yield per year.  

How to increase the share price to benefit shareholders?

Duty of the company public relation officer

The PRO should issue press statements whenever the company receives new contract awards. Just like selling the company’s products or services, the public relation officer should talk to institutional investors frequently to entice them to buy the shares. When institutional investors have a lot of the shares, they will buy more shares whenever the price drops to support the share price. 

My proposal:

The company offer 1 new share for every 10 shares held by shareholders at Rm 1.50 (about 50% discount as allowed by SC rule) with 1 free convertible warrant. The price for conversion can be fixed later according to SC rule. The total number of right issues will be about 106 million shares at Rm 1.50 and the company will eventually receive Rm 160 million. The company will also receive a lot more money when all the warrants are converted. 

Shareholders should be very happy to buy the right issues because they can easily sell the free warrants in the open market. Giving out free convertible warrants is like giving out cash ‘cash ang pow’ to the shareholder.  

Share price should increase:

Investors will rush to buy the share when the company makes the right issues with free convertible warrants announcement. As a result, the share price will shoot up higher and higher to benefit all the shareholders.  

What the company can do with a high share price?     

Every business man hopes to list his company so that he can issue more shares to sell to the public investors to get more cash to do more business to make more profit. Listing his company is like Bank Negara issues a licence to the company to print money. 

When the share price goes up higher, the company can issue more share to make acquisitions. The company can issue shares to buy up small competitors like Carimin and Uzma. The company can even issue shares to buy up or in exchange for all the Perdana shares which the company does not own. 

For example, you can read Corporate news today as follows:

•Stockbroking baron Datuk Tony Tiah is pumping fresh capital into *TA Enterprise Bhd* to finance the privatisation of his flagship company’s listed property arm *TA Global Bhd*, which is said to be the biggest landlord around the KLCC Twin Towers.
TA Enterprise is making a conditional voluntary offer to buy out 2.12 billion shares, which is equivalent to a 39.83% stake in TA Global it does not already own. TA Enterprise currently owns a 60.17% stake.

My experience:

I was a co-founder of IJM Corporation Bhd. About 25 years ago when I was still on the board, our company issued shares to buy up Road Builders Sdn Bhd. which owned large tracks of land in Seremban. With this land acquisition and its own land, IJM Corporation Bhd listed another company called IJM Land Bhd. I believe IJM Land Bhd is one of the biggest property developers if not the biggest in Malaysia.        

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