Philippine Seven announces 100% stock dividend

Philippine Seven [SEVN 115.00, up 5.0%; 41% avgVol] [link] disclosed that its board and shareholders have approved the declaration of a 100% stock dividend that will distribute one common share of SEVN to shareholders for every one common share of SEVN already owned as of Aug. 2, 2024. The stock dividend will be paid on Aug. 15, 2024. The dividends will be paid out of SEVN’s unissued capital stock. SEVN has declared stock dividends seven other times in its history, with the vast majority being between 5% and 15%. Only one was significantly large, which was the 65% stock dividend announced in 2017 when the company raised its ACS to 1.6 billion shares.

MB bottom-line: To the best of my knowledge, SEVN hasn’t given any clues as to why it would do a 1:1 stock dividend, so I’m left only to guess. The declaration wasn’t accompanied by any talk of increasing the company’s authorized capital stock (ACS), so this doesn’t appear to be a CLI Maneuver where a stock dividend is used as a quick non-cash way to “pay” for an ACS increase. Unlike back in 2017, it doesn’t look like this declaration is in service of any kind of ACS increase. And why would it be? SEVN’s management team already had access to over 800 million unissued common shares in its ACS that it could use to sell to an investor through private placement or to the public through a stock rights offering or follow-on offering, but it decided to just “give” those shares to the shareholders instead. Feels like they aren’t in it to raise cash, so I’m left to guess at the typical reason for doing a stock dividend of this type in the absence of paying for an ACS increase, which is to boost liquidity of the shares. By effectively doubling every shareholder’s holdings, SEVN will cut the share price in half (which does basically nothing but gives the appearance of affordability) and increase the number of shares in the public float. Will that make it easier for investors to get in and out of SEVN? I personally don’t think it’s that big of a deal. If I held ?200k worth of SEVN, it’s probably going to be just as easy to sell my pre-dividend 1700 shares as it would be to sell my post-dividend 3400 shares. It’s probably easier for smaller traders to trade on the margins, but for the bulk of traders dealing in SEVN, this won’t really have an impact.  

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