PHINMA Corp. [PHN 20.00, down 3.4%; 30% avgVol] [link] revealed it has “secured the necessary approvals” for a P1 billion stock rights offering, with an offer period running between November 13 and November 19, and a listing tentatively scheduled for November 27. Existing PHN shareholders of record as of November 8 will be allowed to purchase one offer share for every 5.56 to 6.17 PHN shares owned. PHN said that the money raised would help the company “better fuel investment and expansion endeavors”. PHN’s CFO added the funds would also “strengthen [PHN’s] balance sheet”. The proceeds of the sale will be used to “support initiatives” like PHINMA Solar’s projects and Philcement’s manufacturing facility In Davao del Norte. PHN said that it would “boost” PHNMA Properties’ projects in cities like Bacolod, Cebu, Iloilo and Davao”, plus “bolster” PHN’s “new ventures” like the Union Insulated Panel Corp’s facility and “other opportunities” in “socialized housing, food security, healthcare, and the green industry.” PHN will set the final price of the offer on October 31.
MB bottom-line: It’s been a while since we’ve done a stock rights offering (SRO), so let’s cover the basics really quickly. An SRO is like a follow-on offering, except that the ability to buy the offer shares is restricted to people who are already shareholders of the company, and the maximum amount of shares that you can buy is determined by the number of shares you already own. In this case, if you own P10,000 worth of PHN, you’d be able to buy between around 80 or 90 SRO shares (depending on the final entitlement ratio) for a price of between P19.42 and P21.55, depending on the final price. Ok, with that technical stuff out of the way, there are a few things here to note: (1) this raise doesn’t seem like it has anything to do with the investment that PHN’s subsidiary, PHINMA Education, took from KKR, since all of the potential uses for the funds seem related to various real estate and industrial projects; (2) the size of the raise seems quite modest relative to how the funds are to be used, and (3) if PHN is on your list, SROs can be a decent way to pick up additional shares at a slight discount. I’ll take a closer look at this one once PHN sets the entitlement ratio and the price. You can take a look at the prospectus here.
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