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Unable to access bank loans, businesses pay dividend in shares
Fifty companies have got the State Securities Commission’s permission to issue shares to pay dividends to shareholders by the end of June 2008.
The dividend payment in shares has sparked the worry about the so called ‘share dilution’ which may make the share prices drop further.
However, analysts said that businesses have made wise decisions to pay dividends in shares, as the move is described as ‘one stone that kills two birds’, with which, businesses can pay dividends and get capital for their re-investments.
The State Securities Commission (SSC) on June 27 sent a document to five companies, including the Quang Ngai Sugar Joint Stock Company, Southern Battery Company, Hoang Anh Gia Lai Joint Stock Company, Minh Hai Seafood Import-Export Company and Kinh Do Joint Stock Company, stating that SSC does not protest the companies’ plan to issue shares for dividend payment. However, the commission has asked the companies to follow necessary steps as stipulated by the laws in share issuance.
An official from SSC said that recently, many companies asked to issue shares to pay dividend. When asked why SSC still accepts the share issuance plans, though it well knows about the possible share dilution, the commission said that it cannot reject the plans if the companies can meet the set requirements and the plans have been approved by shareholders’ meetings.
“There is no legal provision that can prohibit companies from issuing shares,” he said.
The official said that more and more companies choose to pay dividends in shares, because they cannot access capital from banks. However, the official has advised companies to think carefully before deciding to issuing shares. Borrowing money from banks at high interest rates will make the companies’ profit decrease in short term, but this will not cause the share price decreases in long term.
Doan Van Minh, General Director of Hai Phong Securities Company, also said that in these current conditions, businesses seem to have no other choice than issuing shares.
Nguyen Thi Loan, Chairman and General Director of Hoa Binh Securities Company, also thinks that shareholders prefer cash to shares, but they have no other choice in this case.
VNN
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