Quick takes from around the market

1. Chelsea [C 1.32 unch] [link] issued 73,932,000 common shares to Metrobank [MBT 52.35, up 0.7%] and 3,859.000 common shares to the Private Education Retirement Annuity Association (PERAA) as part of C’s plan to prevent default by converting certain outstanding debts into equity. Together, the shares represent 3.42% of C’s post-transaction outstanding shares. The issuance to MBT allowed C to wipe out P221.8 million in debt (~P3.00/share), and the issuance to PERAA allowed C to eliminate P11.6 million in debt (~P3.00/share).

 

MB quick take: The conversion of the debt to equity eliminates about P16.3 million in annual debt service costs, which is significant for a company that is on pace to lose nearly P900 million this year (based off of a rough extrapolation of its Q2 Quarterly Report). Why did MBT and PERAA “pay” P3.00/share for C stock that is only worth P1.32? As the saying goes: something is better than nothing.
 

2. PSE [PSE 174.00 unch] [link] reported “NIL” short sales occurred yesterday during the PSE’s launch of its short-selling program. There was no statement from the PSE to provide context to this result, but forums online were filled with reports that brokers were simply not ready to facilitate short-sale trades.

 

MB quick take: This post from Mike Macainag, Head of Retail Equities at Maybank Securities Philippines, tells the tale. After 27 years of teasing, the SEC and PSE suddenly jumped to life and implemented the short-selling program in a move that surprised traders and brokers alike. Perhaps due to the complexity of the agreements needed in the background to facilitate the borrowing program, or perhaps because of red tape, or confusion caused by poor communication, the PSE was forced to delay the implementation of the program by a few weeks to allow brokers a chance to “catch up”. By what we saw yesterday, brokers still haven’t caught up, and nobody seems to know exactly what is going on. It’s hard to call it a “launch” if the rocket’s engines don’t fire. Even a soft launch is probably too strong of a term to use for what happened yesterday. Still, I’m hopeful that the PSE can iterate and communicate its way through the process. What else