HPG answers shareholders about treasury share

Does Hoa Phat buy treasury shares?

Recently, the Board of Directors of Hoa Phat Group has received many proposals from shareholders that the group should consider buying treasury shares when the stock price fluctuates to a low level and the company has abundant cash resources. However, the group’s Board of Directors does not have a policy to buy treasury shares during this time due to the following reasons:

1. In the past, listed companies could buy treasury shares for investment purposes, stabilize prices, and sell them when the stock price was high. Hoa Phat also bought treasury shares and then sold them when needed.

However, the purchase of treasury shares has changed according to the Government’s specific regulations as follows: From January 1, 2021, a public company that buys treasury shares must reduce its chartered capital corresponding to the total value of repurchased shares. According to the Article 36 of the Law on Securities in 2019, such treasury shares will not be sold.

2. If the group buys treasury shares, the following problems will arise:

a) The charter capital of the Parent Company (the Group) is currently VND44.7 trillion while the total chartered capital of the tier 1 subsidiaries in the group is VND63.1 trillion. The total chartered capital of the subsidiaries is larger than that of the parent company. In case of buying treasury shares, the charter capital of the Parent Company will decrease further, leading to an imbalance and disproportionate to the group's size.

b) Violating commitments with financial institutions that are providing credit to Hoa Phat Group. When Hoa Phat Group borrows money, it has committed not to reduce its chartered capital and will notify banks when there are changes.

 For the above reasons, Hoa Phat Group will not buy treasury shares at this time. The company would like to answer shareholders about not buying treasury shares as above.

 HPG News