Asustek Computer Inc (華碩) shares plunged for a second straight trading session yesterday amid persistent investor concerns about potential losses as the notebook computer maker said it would divest itself of a PC manufacturing unit to separate its branding and manufacturing businesses.
This could be a desperate move by Asustek to save its manufacturing business Pegatron Technology Corp (和碩聯合), which has been struggling to receive orders from companies other than Asustek amid escalating competition in the notebook manufacturing sector, some analysts have said.
Asustek shares dipped 6.01 percent to NT$56.3 yesterday, regaining some strength from a daily-limit 7 percent loss in the early trading session. The unusual spinoff plan sent the shares down 7 percent on Monday, the first trading day following the announcement on Friday.
Asustek topped the top 10 hottest stocks on the Taiwan Stock Exchange yesterday with 198 million shares changing hands.
Asustek, which stunned the market with its Eee series netbook, said it intends to divest itself of 75 percent of its holding in Pegatron via an 85 percent capital reduction. In other words, after the completion, Asustek shareholders would have 0.15 shares of Asustek and 0.404 shares of Pegatron for each Asustek share.
“This deal reveals the urgency to free up Pegatron to give it the opportunity to receive orders from other PC brands,” Vincent Chen (陳豊丰), a downstream tech analyst at Yuanta Securities (元大證券), said in a report.
Chen called this deal “a necessary evil not welcomed by all.”
Some investors are opposed to the deal as they are unwilling to own Pegatron directly. This reaction, however, seems irrational as Asustek owns 100 percent of Pegatron and it is an integral part of Asustek’s value, Chen said.
Coinciding with Asustek’s spinoff plan, the Taiwan Stock Exchange Corp (TWSE) held a public hearing to collect opinions on how to reset share prices for companies launching spin-offs or share reduction programs.
The TWSE is considering allowing new listed stocks to trade without the 7-percent daily limit on their debut, following the completion of spinoff, or share reduction schemes, to fully reflect the stock’s value.
The fair value for Asustek would be NT$317 per share and NT$44.6 per share for Pegatron, when Asustek re-list on the Taiwan Stock Exchange and Pegatron launches an initial public offering next year, Chen said.
Asustek yesterday told investors it expects to resume trading of Asustek shares on July 23 and to debut Pegatron in early August.
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