In the past few years, the word personal position There is quite a lot of discussion in the Indonesian capital market. The reason is the Slim Group. which is one of the largest conglomerates in this country It is reported that shares will be bought with this mechanism. what does it mean by personal position And how does it affect the stock market as a whole? This is a discussion
Definition of Private Placement
personal position It is a new share issuance activity whereby companies offer new shares to selected investors only. in indonesia The specificity is also known as a capital increase without subscription rights (PMTHMETD).
as the name says Issuers who issue shares using this mechanism do not grant the right to place orders to existing investors or sell shares on the stock exchange. Instead, it will be offered directly to selected investors. These selected investors are usually large retail investors such as Anthony Salim, or large institutional investors such as banks or other companies.
Difference Between Private Placement, Issuance and IPO
Issuers on the Indonesian stock exchange can issue and sell shares in a number of ways. If the shares issued by the company can be traded freely on the stock exchange. The process of issuing shares is known as Initial public offering (IPO).
After an IPO, it is not uncommon for companies to increase their stock market supply by issuing new shares. In this case, companies have two options: sourcing. Pre-order rights to existing investors (rights issue) or offered to investors directly (personal position).
Effects of Private IPOs on Share Prices
This policy affects the psychology of investors, especially the old investors of the issuers. The reason is the issuance of new shares. As a result, the earnings per share (EPS) that shares for those shares have the potential to decrease (dilute) as well.
For example, investor A owns 1,000 shares in issuer B. When the number of shares outstanding from issuer B is only 10,000 shares, investor A automatically owns 10% of the shares of issuer B. However, since the company issues 90,000 new shares. (all 100,000 shares). Then investor A now owns only 1% of B’s shares.
So what? EPS (EPS). Assume that Issuer B’s income is IDR 1,000,000 for 2 consecutive years. In the first year, the number of shares B has 10,000 shares, so that each share is entitled to a profit of Rp 100 and investors. A will receive a profit of Rp. 100,000. However, due to the issuance of new shares, now Rp. 1,000,000 must be divided into 100,000 shares so that now profit per share is only Rp. 10 and Investor A’s profit is reduced to Rp. 1,000,000. 10,000 rupees
As for the issuance mechanism, it is managed with the right to order shares at a special price. Therefore, the old investors still have the potential to hold the same shares. However, in the mechanism personal positionThey do not have these rights.
It is therefore not surprising that the share price will drop after the company issues new shares with this mechanism. Because old investors sell a lot of shares because they are not confident that the share price will be stable in the long term.
Why do companies make personal positions?
like rights issue Like IPOs, issuing shares through this mechanism also aims to increase the company’s capital so that the company’s business operations are smooth. this
The first aspect is that the administrative costs and processes required to perform individual actions are relatively cheaper than an IPO. Therefore, the company can save money to be allocated for other expenses.
The second characteristic is The company has taken individual actions to attract large investors who do not invest in the company. Therefore, the company may have the opportunity to access smoother cash flow in the future.
Private IPO Example
Throughout 2022, a number of non-executive additional equity firms (PMTHMETDs), one of which is PT Bumi Resources Tbk (BUMI), reportedly issued 2 billion new shares in the mining company owned by the Bakrie Group.
These shares will be sold at a price of Rp. 120 per share and the goal is to collect Rp. 24 Trillion or approximately US$1.6 billion at an exchange rate of Rp. 15,000. late payment)
Is private placement bad for investors?
for old investors The issuance of new shares may be unsatisfactory. Because the issuance of new securities will reduce the shareholding. Especially if the issuance of new securities does not provide pre-order rights.
However, a capital increase without subscription rights (PMTHMETD), also known as a private placement, does not always harm stock investors. especially long-term investors
This is because it is possible that the money collected from issuing new securities will be used to finance the company’s strategic projects. In order to create profits for investors in the future as well Not to mention the fact that bringing large investors into a company’s shareholder position can smooth out a company’s cash flow.
Therefore, investors should know the purpose of issuing new securities before deciding to hold or sell their shares. If projects developed by the company can be profitable in the medium to long term. It doesn’t matter whether investors hold it or not.
Information on the company’s business objectives in issuing new securities can be found in the prospectus issued on rights issue or you can go to the news page and best stock trading app if what happened is personal positionThe latest news on company policies like this is one of the keys to investor success.