Greentree Holdings Limited, a Special Purpose Vehicle (SPV) and subsidiary of TRG International (TRGIL) has so far acquired shares worth of around US$45-50mn of TRG Pakistan (TRG) shares.
To recall, the purpose of setting up the SPV was to acquire TRG Pakistan shares from the market in order to utilize the proceeds from the sale of its stake in E-Telequote (subsidiary of TRGIL) and to maximize the value & capital return to its shareholders.
A notice sent to the exchange by TRG dated Dec 20, 2021 stated that TRGIL intends to utilize all or part of these liquid assets to purchase shares of TRG from stock market from time to time in order to provide value, benefit and liquidity to the shareholders of TRG.
The portion of liquid assets of TRG which had been parked in the SPV was around US$120mn out of which estimated buying of around US$45-50mn has already been done. In its Analyst Briefing dated Feb 10, 2022, TRG management stated that it had bought US$34mn worth of 49mn shares by than. Since than, the total purchases of the shares can be calculated from PSX notices.
It will be interesting to see if the 30% threshold for Tender offer as per the Listed companies Substantial Acquisition of Voting Shares and Takeovers regulations 2017 will come into play or not if Greentree Holdings reaches 30%.
Despite buying of TRG by the SPV, TRG stock has underperformed KSE 100 declining by 34% vs KSE-100 index which is down by 6% in 2022TD. We attribute this to its negative publicity after harassment allegations on founder of Affiniti and potential delay in the listing of Afiniti (TRGIL subsidiary).
Moreover, Tech stocks globally have come under pressure. In 2022TD, NASDAQ 100 Tech Index is down by 31% and S&P GL 1200 Info Tech Index (SGI Index) tumbled by 25%. Similarly, S&P BSE Teck index dropped by 23% in 2022YTD.
Major reason behind this underperformance include 1) rising FED rates, 2) stretched valuations of tech stocks, 3) Russia-Ukraine war, 4) lockdowns in China, and 5) weak economic growth outlook. On top of this, tech sector had boomed during the pandemic period however this growth is now anticipated to normalize.
Courtesy – Topline Research