Last week, from April 1-5, Cemex Holdings Philippines has one of the most actively traded stocks in the market due the news that it will raise funds and planning to more than triple its capital stock through stock rights offering.The firm was able to trade 329.21 million shares with P721.26 million worth. On March 29, the shares of Cemex closed at P2.02 each. Since the news is somewhat surprising, what are the potential effects of this to the current investors of Cemex? How did the investors react to the news
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The active trading of Cemex’s stocks is the most obvious reaction of investors to the current news. Investors were surprised that they rushed to liquidate their shares in the firm. $250 million funds is a big deal and it has a huge dilutive effect on the earnings of Cemex. The assumption that the price of the stock rights offering being lower than the current market price of the shares triggered the investors to sell their shares. In fact, on the day the news was released, the traded shares were 118,225,000 compared to the 13,678,000 stocks traded on the previous day. If you’re a current investor of Cemex, would you do the same?
Cemex’s Board of Directors has already approved the firm’s new authorized capital stock worth P18,310,395,454 or 18,310,395,454 with P1 par value. The company disclosed that part of their equity capital raising includes rights offering, which is a pending approval from its board of directors. The stock rights is only a portion of the strategy of the company and fund raising is not limited to it. Therefore, there may still be other ways but the firm hasn’t explained it yet to the public. The current authorized capital stock is at P5.195 billion or 5.195 billion shares at P1 par value.
The $250 million funds to be raised by Cemex would be put into good use. It will be utilized for the betetrment of its capital structure, give more flexibility to its balance sheet, and spend for the complete expansion of its Solid Cement plant located in Antipolo, Rizal. The firm would allocate $235 million out of its total funds in order to add 1.5 million metric tons (MT) to the capacity of the Solid Cement. This will then lead to the 26% overall capacity of Cemex. Last year 2018, the company has a consolidated net loss of P930 million, down from its P659 million 2017 net income. Though the company experienced losses, the net sales were up to P23.42 billion due to the increasing demand of residential constructions.