Treasury shares used as dividend payments
Treasury shares have been used to pay shareholders’ dividends as the payment does not lower the stock price on the ex-dividend date.
On the ex-dividend date, a company’s shares are traded without the value of the dividend payment.
When a buyer purchases shares on or after the ex-dividend date, he is not entitled to the declared dividend.
The declared dividend is owned by the shareholder before the ex-dividend date.
Under existing regulations, when a company pays treasury shares for bonuses and dividend pay-outs, the opening price of its shares is not adjusted on the ex-dividend date.
Meanwhile, if the company pays cash dividend, the opening price of its shares will be changed.
At the Ha Noi Stock Exchange, the trading band for an ex-dividend stock is 30 per cent on either side if the company uses treasury shares in its bonus and dividend payments.
Among listed companies that use treasury shares to pay bonuses and dividends to shareholders is Vicostone JSC (HNX: VCS).
The marble maker in early September decided to issue treasury shares for existing shareholders at the ratio of 2.04 to 100.
At this ratio, every shareholder will receive 2.04 treasury shares for each 100 shares they have.
Vicostone now has 3.2 million treasury shares, which were bought back in November 2018 when the firm’s shares fell back to the VND65,000-70,000 per share range.
Vicostone shares have gained as much as 20 per cent since the decision was announced to close Friday at VND96,900 (US$4.17) per share.
In 2014, the company purchased 10.6 million treasury shares and paid them to shareholders in 2016.
According to analysts, Vicostone’s move would benefit its shareholders because they will have new shares at a higher price without having to purchase them.
Other companies that have done the same included Song Da Industry Trade JSC (HNX: STP) and Sai Gon Thuong Tin Commercial Joint Stock Bank (HoSE: STB).
Treasury shares sold
Other companies have sought to sell treasury shares to raise capital and fund their business activities or look for potential investors.
The HCM City Infrastructure Investment Corp (HoSE: CII) in August planned to sell 35.5 million treasury shares for a minimum VND32,650 per share, 60 per cent higher than its share price at the same time.
The company shares have moved almost flat since then, ending Friday at VND20,300 per share.
Other companies that also do so are Thanh Thanh Cong-Bien Hoa (TTC Sugar) (HoSE: SBT) and Huu Nghi Food JSC (UPCoM: HNF).
The two companies want to sell treasury shares to earn some revenue so they can restructure their capital and debt, and increase the volume of outstanding shares.