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HAG reneges on share buyback plans
It's normal on the stock market for companies to announce they're going to back their own shares, but it's becoming less common for firms to follow through with their plans.
Property developer Hoang Anh Gia Lai Co (HAG) is the latest company to announce a buyback plan and fail to go through with it.
Yesterday should have been the deadline for HAG to complete its purchase of 10 million shares in the company, but earlier this week, HAG surprised investors with the announcement that it would put off the buyback scheme.
According to its filing to the HCM City Stock Exchange, HAG made the decision to ensure long-term investment capital for its key projects. The company said that bondholders suggested stopping the buyback and using the money to invest in future projects.
In the previous plan, the company registered to buy 10 million HAG shares from June 10 to July 9 with expected prices from VND16,000 (US$0.73) to VND22,000 ($1.01) a share to stabilise the price in the market."
No shares were purchased during this time. But HAG's price increased 6.7 per cent from VND18,000 a share on June 10 to VND19,200 on Monday, before falling again in the last two sessions after the announcement of the stoppage.
However, HAG was within its legal rights. It isn't rare for companies to do this in Viet Nam.
They can register to buy back their shares, but by the deadline they also can say they could not complete the purchase due to unfavourable market condition or unsuitable prices. In March, PV Gas (GAS) said it would buy back 10 million shares with the maximum price of VND100,000 ($4.59) a share. However, it ended up buying just 602,000 shares, or just 6 per cent of its registered amount, even though the price was around VND65,600 – much lower than the expected price at that time. GAS attributed this to "problems in the registration procedure that lead to shortened transaction time."
PetroVietnam Drilling and Wells Service (PVD) announced it would purchase 2 million shares of the company from April 23 to May 23, but it bought about 10 per cent of that. This was not the first time PVD failed to finish their buyback plan.
In order to protect investors' interests, the State Securities Commission is drafting Circular 74, which would add provisions forbidding companies to announce their share buyback plans but then not make transactions within the registration time. The draft also prohibits issuers from declaring expected buying prices in their plans.
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