The share issue plans of many companies to raise chartered capital recently were not successfully and they failed due to the prolonged slump in the stock market.
November 27 was the deadline for the shareholders of Chuong Duong Investment Installation and Construction Joint Stock Co (HASTC listed CDC) to pay money for additionally issued shares under the ratio of 2:1 with the price of 20,000 dong per share. At that time, CDC price was down to 20,200 dong per share only so many shareholders decided to reject a buying warrant. CDC shares were not attractive any more. One day later CDC price inched up 21,500 dong per share because shareholders bought a large volume of CDC coded shares at a lower price of 20,000 dong/each on the stock market.
Remaining shares of CDC's additional issue will be offered to other investors, according to the company's chair Tran Mai Cuong. He assessed that the share offering to strategic partners is difficult to succeed because the listed share price is decreasing.
Similarly, DIC Investment and Trading Joint Stock Co (listed on STC) also faced difficulties because of the stock market slide. As planned, the firm planned to issue shares to strategic shareholders under the competitive quotation method with the starting price equalling the average level of five sessions prior to the day of closing the shareholder list minus 20%. But before the company could issue shares, DIC share price reduced sharply to 17,000 to 18,000 dong per share, so the selling price to strategic shareholders also was very low. Finally, DIC decided to issue only some shares.
Unlisted companies are also finding it very hard to issue shares. Vien Dong (Far East) Assurance Joint Stock Co (VASS) had to ask for the shareholders' approval to cancel its share offering plan to increase the chartered capital from 300 billion dong to 600 billion dong although it had finished the list of shareholders. According to the previous plan of VASS, the existing shareholders would have the right to buy additional shares at the ratio 10:4 with the price equalling the face value. But after the plan was announced, VASS share price was only around 6,000-7,000 dong per share. Thus the plan failed completely. Finally, the insurer only issued 16.5 million shares to strategic partners with a price not less than the face value (10,000 dong/share) against the initial level of not less than 20,000 dong per share.
As for CDC, the failure of share issue will slow down the construction speed of projects. But for VASS, the recent share offering is likely to affect the insurer's business plan as the capital raised from the offering is expected to pay for the new headquarter in Vo Van Tan St, HCM City's Dist 3.
Some public companies also suspended the capital increase although their own plans had been approved in the shareholders' meetings.
Most recently, Mai Ling Group Joint Stock Co and VinaCapital agreed to buy back two third of the issued convertible bonds, showing the suspension of capital increase and debt payment of Mai Linh to the VinaCapital. Meanwhile, Thu Duc Housing JSC announced that it would not scale up chartered capital until the end of 2009.
