Tuesday, June 5, 2018

The Very Curious Case of sharebuybacks - Hyflux

In my previous posts, i wrote what management of other companies proactively did to try to save the sinking ship. 

- Proactively issued rights to access capital
- A drastic reduction in management compensation and doing more with less people
- Usage of family and personal assets as a collateral to gain more funds for the company
- Acceptable terms for perpertual securities holders ( Accreditated investors)

Tiger Air
- Proactively issued rights to access capital
- Capital injection by parent company
- CEOs who were changed along the way ( ok i didn't write this in my previous post)
- Redeemed retail perpetual securities at principal

Disclaimer: I am not an investment advisor. Heck, i am not even working in the financial industry. Below are my interpretation and i am grateful if you will let me know if anything i say is wrong and i will correct it in a reasonable time. I am not an expert and don't wish to be assumed to be one. I make losses frequently.

How about Hyflux? I am actually very appalled that not only did they not issue any rights to raise funds, they undertook massive sharebuybacks across the years. I actually digged deeper and here are the various sharebuybacks. 

Take note that in April 2011, Hyflux raised $400 million of preference shares (N2H) from the retail public ( not Accredited investors but unsophisticated investors, i must state again).  And what did Hyflux do to some of the money, in November 2011, they commenced their sharebuybacks, up till 30 November 2015.

It is quite ridiculous that despite Hyflux knowing that they are in a capital intensive industry and despite having raised funds from unsophisticated,retail investors who have retirees among their ranks, they still undertook such a value destruction sharebuyback. Just look at the prices of the shares Hyflux bought back from the market at the 4 column.

And then having spent so much money on the share buybacks, they went to sell their $500 million perpertual securities (BTWZ) to again, a majority of unsophisticated retail investors in April 2016.

Why does Hyflux do sharebuybacks when they are not in the best position to do so?
If Hyflux do survive, i think its imperative for Olivia and her long time directors to step down for Hyflux to gain the trust and respect of the public again.

Further reading :
1) Considerations about Hyflux
2) The fate of Hyflux
3)Will Hyflux recover? The billion dollar question
4) Hyflux-Treatmeat of perpetual share holders- Ezion
5) Hyflux - loans and borrowings - Pacific Radiance
6)A happy ending for retail perpertual securities holders - Tiger Air and Hyflux

1 comment:

  1. Could you please educate me, I thought share buy back leads to better EPS meaning that the share price will rise? It is also implying that the company have the confidence that the business is able to tide over the difficult times so that they might reissue shares back without significant dilution


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