When a capital increase plan causes the stock price to fall.

When the market is sluggish, stocks planning new fundraising and preparing for issuance are sold off by investors, and some companies have to halt their fundraising plans to avoid further sell-offs.

When the market is sluggish, stocks planning new fundraising and preparing for issuance are sold off by investors, and some companies have to halt their fundraising plans to avoid further sell-offs.

DIC Corp has had to halt its new fundraising plan as its stock continues to plummet. Photo : Le Toan

Stock prices fall when companies plan to issue shares.

In the context of a struggling stock market, where investors are finding it difficult to profit, the announcement by companies about plans to issue shares to raise capital, repay debts, etc., has backfired. A series of stocks plummeted as investors sold off to avoid having to contribute more money to the company or to avoid dilution in private placements at discounted prices that individual investors were not allowed to participate in.

At the Development Investment Construction Corporation (DIC Corp, ticker DIG), in mid-December 2024, the Corporation received approval to offer 200 million shares to existing shareholders at a price of VND 15,000 per share, raising VND 3,000 billion, and plans to receive payments from investors from January 21, 2025 to February 19, 2025.

However, from December 10th to December 30th, 2024, DIG's share price decreased by 10%, from VND 21,000/share to VND 18,900/share, and if calculated from April 12th, 2024 to the present, it has decreased by 43.8%, from its peak of VND 33,600/share. Thus, although DIG's share price had already fallen sharply in the first half of the year and traded at a low of VND 19,800/share, after DIC Corp announced the issuance of additional shares, the price continued to fall and remained below the accumulation zone of VND 19,800/share.

Similarly, on December 2nd, Nam Kim Steel Joint Stock Company (NKG) was approved to offer 131.6 million shares at a price of VND 12,000 per share, raising VND 1,579.7 billion, with the subscription and payment period from December 31st, 2024 to January 24th, 2025. During this period, from November 11th, 2024 to January 2nd, 2025, the NKG share price decreased by 13% from VND 16,830 to VND 14,650 per share, and more broadly, from June 17th, 2024 to the present, the NKG share price has decreased by 29.8% from VND 20,880 per share.

Most recently, from December 20, 2024 to January 2, 2025, the share price of DXG, Dat Xanh Group Joint Stock Company, decreased by 12%, from VND 17,850 to VND 15,700 per share, after the company approved a plan to offer more than 150 million shares to existing shareholders at VND 12,000 per share to raise VND 1,802 billion. The record date for entitlement is January 7, 2025, and the payment period is from January 14 to February 14, 2025.

Thus, in the context of a volatile market at the end of 2024, with many investors being cautious and significant selling pressure from foreign investors, the plans of companies to issue new shares to raise capital backfired, resulting in a large number of shares being sold off by investors and causing a negative effect on the market.

"Dodging the issue" with a new fundraising plan.

With weakening cash flow and negative investor reactions to new fundraising rounds, a number of businesses have had to halt their fundraising plans. For example, on December 23, 2024, DIC Corp announced the suspension of its plan to offer 200 million shares to protect shareholder interests amidst unfavorable stock market conditions and signs of recovery in DIC shares.

Closing a year full of ups and downs.

At the beginning of 2024, the stock market soared with expectations of an upgrade in market status and the recovery of businesses from their lows in 2023. However, in the second half of the year, the market became sluggish with declining liquidity, many mid- and small-cap stocks plummeted, pessimism prevailed, individual investor trading decreased sharply across the board, and foreign investors withdrew a record net amount of over 90,311 billion VND from the HoSE in 2024.

Previously, Hai Phat Investment Joint Stock Company (HPX) announced the temporary suspension of its plan to offer an additional 152.08 million shares to shareholders to raise over 1,500 billion VND. The funds raised will be used to repay the principal and interest on bank loans and bonds. The reason for the suspension is to protect the interests of shareholders due to unfavorable market conditions and to ensure the feasibility of the public offering to existing shareholders.

The Southern Hanoi Housing and Urban Development Investment Corporation (NHA) also announced the temporary suspension of its public offering plan, which had been approved by the 2024 Annual General Meeting of Shareholders. The reason given was a change in the offering plan to align with the current production and business situation, and the plan for raising and using capital in the coming period.

According to the initial share offering plan, the Southern Hanoi Housing and Urban Development Corporation plans to offer more than 8.83 million shares to raise 88.35 billion VND. Of this amount, the company will use 50 billion VND to invest in construction projects where it is the main investor; 30 billion VND to repay debts; and the remaining nearly 8.35 billion VND to supplement working capital.

Previously, at the Vietnam Mergers and Acquisitions (M&A) Forum 2024 organized by Investment Newspaper, Mr. Dominic Scriven, Chairman of Dragon Capital Vietnam, shared: “Another barrier to the capital market and M&A is trust between buyers and sellers. Currently, confidence in the market is somewhat weak, evidenced by the fact that foreign investors have withdrawn a net $3.5 billion from the Vietnamese market and a cumulative $6 billion over the past three years. This is a result of the trust issue.”

It is evident that when the market is weak, liquidity is low, and investors are cautious, raising capital for businesses is not easy, forcing companies to temporarily suspend or postpone fundraising plans to avoid further declines in stock prices.

Source: https://baodautu.vn/khi-ke-hoach-tang-von-keo-giam-gia-co-phieu-d239729.html