Subscribe to Max’s Group (MAXS) follow-on share offering?

Restaurant operator Max’s Group (MAXS) has lowered the price for its follow-on shares to be launched before the end of the year.

Initially, the company announced that the follow-on shares will be priced at P29.50 each. Issuing around 300.14 million shares, MAXS expects to raise up to P14.32 billion from the share offering.

Lower follow-on share price

This week, though, the company disclosed it is reducing the price of each follow-on share to P21.75 apiece. At this price, the company expects to raise P4 billion, much lower than what was initially planned.

Still, the price of the shares remains tentative and the final offer price will be announced only after the bookbuilding process.

The actual dates, though, of the bookbuilding and offer period are yet to be finalized since the company is still waiting for the transaction to be approved by the Philippine Stock Exchange (PSE) and the Securities and Exchange Commission (SEC). In the company prospectus, MAXS said the offer period will run from November 4 to 10, but this has now been deferred to a later date either in later November or early December.

What is a follow-on share offering?

As opposed to an IPO or initial public offering, a follow-on share offering is the subsequent issuance of new shares by a company whose shares have already been issued to the public through IPO, backdoor listing or way of introduction.

In the case of MAXS, its follow-on share sale will provide proceeds that will be used for the repayment of debt with the Bank of the Philippine Islands incurred for the acquisition of a controlling interest in the listed company, Pancake House Inc (PCKH). The other remaining funds will be used for store and commissary expansion.

In July 2014, Max’s Group announced it is consolidating its assets under Pancake House, in a share swap that created the largest casual dining restaurant group in the Philippines. As a consequence, Pancake House changed its name to Max’s Group and its stock code also changed from PCKH to MAXS.

Subscribe to the follow-on share?

The decision to invest in a company should always be the investor’s personal decision, based on informed analysis of and outlook on the future financials of the company.

For those looking for guidance on MAXS’ follow-on share, they can refer to a Special Report prepared by Unicapital Securities, a duly licensed stockbroker in the country, published last week by stock market portal PinoyInvestor.

The Special Report analyzes the company’s valuation and estimates a specific Target Price for the MAXS shares.

According to the Special Report, the fair value of MAXS shares may actually be lower than the initial offer price which means this could lead to a potential downside.

To access the exclusive Special Report, click the image below.


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