Medilines Distributors pops on buy-back announcement
Medilines Distributors [MEDIC 0.78 13.04%] [link], the specialized healthcare equipment provider owned by Manny Villar’s brother, Virgilio Villar, announced a stock buy-back plan with a budget of P100 million.
The stated goals of the buy-back plan are to (1) “enhance shareholder value”, and (2) “manifest confidence” in MEDIC’s “value and prospects”.
MEDIC’s stock jumped 13% on the news, on over 11 million shares of volume.
MEDIC went public on December 7, 2021, at P2.30/share, and is infamous for losing 30% on its first day of trading.
The immediate and substantial losses prompted many to criticize Mr. Villar for his failure to provide IPO investors with a stabilization fund, and even caused the PSE to investigate rewriting its IPO rules to require a stabilization fund for every IPO in the future.
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While the PSE has since backed down from making a stabilization fund an IPO requirement, word around town is that it has become something of an unwritten requirement that the PSE aggressively pushes on new offerings.
Looking at the IPO Tracker, it seems like 6 of the 7 IPOs that followed MEDIC’s IPO “batch” all had stabilization funds.
The lone exception being CTS Global [CTS 0.85 1.16%].
But it’s not like we could draw any real conclusions from that since all of those IPOs are heavily negative.
Getting back to MEDIC for a second, the company raised P1.27 billion in primary funding from IPO investors in December, for stocks that ended up being worth just P0.38 billion before yesterday’s announcement.
Does a buy-back enhance shareholder value?
For frustrated bagholders, it must be better to know that there’s a deep-pocket buyer out there to help prevent further sell-downs, even if that deep-pocket buyer is not some other sophisticated investor, but is instead just the company itself.
The fund represents about 15-20 days’ worth of volume, so it’s not insignificant, but fully deployed it can only reel back about 5% of MEDIC’s outstanding shares, so it’s not massive.
There’s just something off-putting about nuking so much retail shareholder value, then activating a buy-back fund less than a year later to bayonet the survivors and put them out of their misery.
Battlefield medicine, MEDIC style.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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