Under new rules issued by the Taiwanese stock exchange at the beginning of April, Taiwan Cement Corp carried out the biggest block trade sale in Taiwanese history earlier this week, as well as a successful GDR (global depositary receipt) issue.
The Tuesday deal was lead managed by Credit Suisse First Boston and follows a succession of smaller sales by Taiwan Cement in telecoms company Far EastTone, currently the beneficiary of a major share run up.
177,186,000 ordinary shares of the block trade were sold raising $212,623 million at a price of NT$37.55 per share, a 1.96% discount to the stock's closing price on May 3.
The block trade went to mainly Asian accounts, a mixture of long-only and absolute return funds.
The new rule, introduced on April 4 this year, permits a maximum 2% discount to the market closing price, compared to no discount previously.
"This puts the Taiwanese Stock Exchange more in line with other regional exchanges," comments one specialist, pointing out that in Korea the discount range for block trades was recently widened from 7% to 15%.
Specialists in the market expect that the new rule will stimulate similar trades.
Taiwan Cement Corp also utilized Far EastTone's GDR to help its share sell off. The GDRs, each representing 15 ordinary shares, were priced at $18 per share (NT$37.55 equivalent). The company raised a further $40.82 million through the issuance. The discount was identical to the block sale. The GDRs went primarily to long-only funds.
The transaction was timed to capitalize on a major rise in the stock's price, from a low of NT$35.40 in February this year, to a high of NT$40.50 in March this year. However, the stock dropped sharply in late April, possibly prompting the massive sell-off.
Following the sell-off, Taiwan Cement Crop is left with a 1.8% stake in the company. Taiwan Cement's original stake was 7.3%, and the sell-off represents the disinvestment of a 5.45% stake.
Taiwan Cement plans to divest all its remaining shares. However, due to the size of its original stake in Far Eastone, Taiwan Cement has so far been classified as an affiliate company. An affiliate is limited in the speed and extent of its sell-off. However, following the disinvestment, that status will be changed and Taiwan Cement will be able to sell all of its remaining shares.