Financial shares

Fubon Financial shares under pressure on rights issue discount

Taipei, Aug.31 (CNA) Shares of Fubon Financial Holding Co. came under pressure on Tuesday morning after the company priced a rights issue to raise funds for its acquisition of Jih Sun Financial Holding Co at a steep discount, dealers said.

The sell-off was also triggered by the quarterly index adjustment of global index provider MSCI Inc., which will reduce Taiwan’s weighting in its major indices after the market closed on Tuesday, they said.

By 10:19 a.m., shares of Fubon Financial had fallen 1.30% to NT $ 83.70 (US $ 3.01) on the Taiwan Stock Exchange (TWSE), where the benchmark Taiex was down. 0.94% at 17,232.47.

The stock was sold soon after the market opened, with investors reacting to the price of its rights issue announced on Monday.

In a statement, Fubon Financial said its board of directors has approved a plan to issue 548 million new shares in a rights issue at NT $ 58.9, which represents a discount of NT $ 58.9. about 30% from the closing share price of NT $ 84.80 on Monday.

The company also decided to issue around 333 million preferred shares at NT $ 60, a discount of 29% from Monday’s closing level.

“The steep discount has hurt investor morale, so it’s no surprise that the stock encountered headwinds today after yesterday’s rally,” said Tom Tang, analyst at MasterLink Securities.

On Monday, Fubon Financial was among the financial stocks that pushed the main chart up, up 1.56%.

“But the discount sale could be short lived because Fubon Financial has strong fundamentals,” Tang said.

Fubon’s net profit for the first half of 2021 increased 135% from a year ago to NT $ 87.66 billion, with earnings per share of NT $ 8.29, the highest of the 15 holding companies Taiwanese listed financiers.

Tang said Fubon Financial is expected to post EPS above NT $ 13 for 2021.

According to Fubon Financial, funds raised through the issuance of rights and the sale of preferred shares will amount to around NT $ 52.28 billion, and the moves are expected to be completed by the end of October, on time. for the acquisition of Jih Sun Financial.

In December 2020, Fubon Financial announced that it was launching a takeover bid to acquire Jih Sun Financial.

In March 2021, Fubon Financial acquired more than 2.03 billion shares, or a 53.84% stake, in Jih Sun Financial, which is higher than the target of 1.89 billion shares set in the merger plan he first announced in December.

This paved the way for the integration of Jih Sun Financial under his umbrella and the completion of the first Taiwanese merger of two financial holding companies.

“Today’s sale also reflects a reduction in Taiwan’s weighting by MSCI. Many passive mutual funds need to adjust their portfolios before adjustments take effect after the market close today,” said Tang.

MSCI downgraded Taiwan’s weighting in three of its main indices, including the MSCI Emerging Markets Index, which is closely watched by foreign institutional investors.

Taiwan’s weight in the MSCI Emerging Markets Index was reduced to 14.21 percent after the index was revised from 14.30 percent previously.

“Fubon Financial is not the only large cap stock feeling the effects of the weight reduction,” Tang said.

Among them, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most weighted stock in the local market, had lost 0.83% to NT $ 600.00 at 10:19 am.

(By Frances Huang)

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