Ayala Corporation Value Trap

The most risky investment out there is an institution with a lot of following. Ayala Corporation has been there since the beginning of the time in the Philippines. It is one of the oldest corporation in the country. But I think, of the recent events, shareholders of the company had been well played by the Ayalas.

Here's my thoughts on it. The Ayalas began a sell off of their shares cashing out P630 million total. This is after a share buy back of their own company share. A share buyback is a good way to increase share value, ramping up its price before a major sell off. The Ayalas did give a good value to the shareholders, from 300+ per share to 450+ per share after the share buyback. Then this is where it gets good, they sold all of those overvalued shares. Making P630 million in the process. With hype still on, the share price still moved upward some more.

If you're thinking, if the Ayalas sold all or most of their shares, then they don't own the company anymore? Wrong, they added tons more shares as a stock option. Diluting the share and undervaluing it.


Security Name : Ayala Corporation
Date : 02/07/2012
Headline : LA #0054: Ayala Corp. additional listing
Content : The Exchange approved on April 25, 2001, the application submitted by AYALA CORPORATION (the “Company”) to list additional 127,479,000 common shares, with a par value of P1.00 per share, divided into (a) 60,000,000 shares to cover the ESOP; (b) 60,000,000 shares to cover the ESOWN, (c) 7,309,000 shares to cover the 40% stock dividend for 1995 ESOP and ESOWN shares; and (d) 170,000 shares to cover the 50% stock dividend for 1996 ESOP shares. Further, with reference to Circular for Brokers No. 2515-2005 dated May 25, 2005, the change in the par value of the Company from P1.00 to P50.00 took effect and was reflected on the Exchange computer system on May 30, 2005. Correspondingly, this brings the number of common shares approved for listing from the aforementioned 127,479,000 shares, with a par value of P1.00 per share, to 2,549,580 shares, with a par value of P50.00 per share, divided into (a) 1,200,000 shares to cover the ESOP; (b) 1,200,000 shares to cover the ESOWN; (c) 146,180 shares to cover the 40% stock dividend for 1995 ESOP and ESOWN shares; and (d) 3,400 shares to cover the 50% stock dividend for 1996 ESOP shares. Finally, the Exchange approved on December 13, 2006, the application submitted by the Company to list additional 8,864,000 common shares, with a par value of P50.00 per share, to cover the Company’s ESOWN. In this connection, please be advised that an additional 484,918 common shares have been availed of and fully paid by the optionee/s under the Company’s ESOP/ESOWN. In view thereof, the listing of the additional 484,918 common shares is set for Wednesday, February 8, 2012. This brings the number of common shares listed under the Company’s ESOP/ESOWN to a total of 3,065,255 common shares.

Its like printing money. Lesson of the day: Not all share buybacks are equal.