Petron preferred shares offer completed with near sell-out

Petron [PCOR 2.54 ?1.6%; 129% avgVol] [link] gave notice to the exchange that it raised P16.83 billion from its sale of Series 4D and Series 4E Preferred Shares upon the completion of the offer period last Friday. The company sold 99% of the total offer, which was 13 million shares as part of the “firm” offer and an additional 4 million shares as part of the oversubscription options. The shares will be listed and tradeable this coming Monday (September 23).

MB BOTTOM-LINE:  I was surprised by the groundswell of interest in these shares, but that doesn’t mean that I can’t acknowledge the valid reasons behind that interest. The most common reason being that investors are looking to “lock-in” higher yields ahead of subsequent interest rate cuts that will put downward pressure on yields for (potentially) years to come. While the Federal Open Market Committee (FOMC) in the US is most likely to deliver a 25 bp cut to rates tomorrow morning, that doesn’t fully capture the sentiment that has been building up heading into this decision. There’s been a broad push for the FOMC to go harder and deliver a bigger cut than this expected smaller step; a group of Democratic US senators have even written a letter to the US Federal Reserve’s Chair requesting a 75 bp cut to address “data indicating slower job growth”. While obviously one cannot remove the “political” side of the letter, the growing sentiment that the US Federal Reserve has been too slow to pivot and must now play catch-up will likely cause this kind of speculation to remain going forward no matter what the US Federal Reserve does tomorrow. If your bet is that central banks will need to play this type of catch-up, then rotating cash into offerings like this could be a good part of that strategy. Not for everybody, though. Lower rates are broadly positive for equities. 

Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.