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The Straits Times / The Business Times News on HG Metal
HG Metal to issue up to 18m shares for $6.3mAzhar Khalid - April 20, 2004The Straits Times SESDAQ-LISTED HG Metal Manufacturing yesterday unveiled a plan to place new shares privately, joining a string of companies that have done so in recent weeks. In a statement to the Singapore Exchange, the company said it will place out up to 18 million new shares at 36.33 cents apiece, raising $6.3 million. Only last week, mainboard-listed Guthrie GTS and Citiraya Industries said that they would issue 160 million and 55 million new shares at 20 cents and 39.94 cents apiece respectively. While a large portion of the money raised through these new placements will be used as working capital and for expansion, some companies also plan to use the funds to trim their debt or invest in short-term interest-bearing instruments to generate income. Analysts say that companies are discovering a safer route to raise capital through private placements given the current lacklustre performance of the local bourse. Subscribers of shares placed privately hope to cash in on their stakes once the economy is firmly back on the rails. Even those looking to book immediate gains can do so since share placements are usually sold at a discount to the market price, some dealers said. Most analysts believe that such subscribers are usually long-term players aiming to benefit from the fortunes of a business when it expands. However, the private-placement route is not without its pitfalls. Analysts say that existing shareholders of a company usually frown on a new share issue as such an exercise dilutes their stake in the company. 'New shares mean new investors coming on board, and this could potentially create instability in the company's management,' said a research head at a foreign brokerage firm. He said that substantial shareholders placing out their stake may, however, be seen as a positive move as there is no dilution involved for minority shareholders. Such sales are usually in response to requests for greater liquidity in the stock from fund managers, the analyst said.
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