Tendering shares gets harder for companies amid coronavirus pandemic

Companies are not just finding it difficult to raise money by selling securities to investors in this volatile market, but also facing issues in getting investors to tender them. Even as equity fundraising by issuing securities has come to a virtual halt, at least two firms, which intended to do the opposite, find themselves having to alter plans.

Standard Chartered had announced a termination programme for its Indian depository receipts (IDRs), a kind of security with shares listed abroad as its underlying. The shares were to be sold on the London Stock Exchange (LSE) and could be purchased by J.P. Morgan Securities under an agreement for a buyback programme.  The buyback has since been suspended, which also had an implication for the IDR termination process.

 

 

It said the IDR shares would not be purchased anymore by J.P. Morgan Securities but can be purchased by anyone else on the floor of the LSE. It has also made other procedural amendments. “We believe that due to the ongoing Covid-19 pandemic (including lockdown at various places, work from home by various organisations, and restricted movement of people to essential services), the IDR holders may face considerable issues in submitting hard copies of the withdrawal orders and the enclosures thereto. Accordingly the company has decided to provide an option of submission of soft copy of the withdrawal orders and the relevant enclosures by the IDR holders,” it said.

Another firm, Orchid Securities, made a similar announcement.

“Due to the Covid-19 crisis and subsequent lockdown, the public shareholder’s/ seller’s broker(s) are finding difficulty in tendering the shares,” it said. It extended the closing of the offer from April 8 to April 24.  It was unclear if any additional step would be taken since the lockdown has since been extended. An email sent to those managing the offer did not immediately receive a reply. The shares were to be acquired as part of an open offer under the takeover regulations.  

Alok C Churiwala, managing director at Churiwala Securities, said there can be a lot of offline work which also needs the presence of a full broking team. This is difficult now. “Every broking office is working with a skeletal staff,” he said.

Several clients may not be using internet banking facility. The lockdown also makes it difficult to do the necessary documentation for completing the tender process, said another senior broker.