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HOSE: listed companies crying on capital increase plans
The listed companies at the HCM City Stock Exchange (HOSE) which have the chartered capital of less than VND80bil have been pushed into dilemma as they must raise the capital to VND80bil in this year.
Under the regulations stipulated in the Decree 14 guiding the implementation of the Securities Law, listed companies at HOSE must have the minimum capital of VND80bil two years after the law came into effect. The deadline for the companies to raise the chartered capital is January 1, 2009.
Listed companies complain that they would sustain heavy losses if they issue shares to raise chartered capital at this moment, when the stock prices are falling down.
Le Quang Hung, Director of Saigon Garment Joint Stock Company said that the company’s shareholders frankly said that they do not have money to buy shares at this moment. However, if it does not issue shares now, it will not be able to raise the capital to VND60bil prior to January 1, 2009 as required. The company is considering raising the chartered capital from VND46.7bil to VND97bil in 2008 by paying dividends in shares and issuing the options to buy shares to existing shareholders.
An official from HOSE also said that many listed companies have expressed their worries about the plan to raise chartered capital. It seems that no company can issue shares in the first quarter of the year as it will take much time to follow necessary formalities. Meanwhile, three quarters prove to be not a long time enough to implement the plans on raising capital.
According to HOSE, some 50 listed companies have the chartered capital of less than VND80bil, most of them have the capital of between VND30bil and VND60bil.
Representatives from listed companies said that the biggest problem for them now is that they ask for issuing shares at the ‘sensitive moment’, when state agencies do not encourage share issuances for fear that the massive securities issuances may lead to the ‘share dilution’ and oversupply of commodities in the market. State management agencies’ officers do not hurry in approving companies’ plans, which has resulted in the tardiness in share issuances.
Listed companies have called on SSC to make clear statement about that. SSC should approve companies’ plans on share issuance soon to create more favourable conditions for the companies. Meanwhile, it should consider extending the deadline for increasing chartered capital to VND80bil.
Returning to the time when the Securities Law came into effect, January 1, 2007, as the stock market prospered at this moment, policy makers and listed companies believed that two years would be enough for companies to raise capital to VND80bil.
However, the situation has become quite different, and if SSC does not extend the deadline, companies will have to increase capital reluctantly, even when they do not have the plans on using the capital more effectively. Moreover, financial burdens will be put on listed companies as they have to pay dividends to shareholders when they do not have good business plans.
As stipulated in the law, only the Government has the right to decide whether to delay the time for raising capital to VND80bil. Therefore, investors have asked SSC to make proposals to the Government on extending the deadline for approval.
VNN
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