Tuesday, 6 December 2011

Stock options and bonuses to entice SP Setia’s top staff

I refer to the article in The Star:


"Permodalan Nasional Bhd (PNB) may be paying out lucrative bonuses and stock options to property developer SP Setia Bhd’s top management staff".

I don't think PNB will be paying out one cent or one option to SP Setia's staff, I guess they mean that PNB is ok if SP Setia pays out bonuses and stock options to its staff, a rather big difference. 

PNB holds a 34% stake and Tan Sri Liew an 11% stake, so other shareholders hold a majority of 55% of the shares. I think it would be not more than fair if they are also asked about their opinion, but they don't feature at all in the article, it is as if they don't exist.

The opinion of Tan Sri Liew was that the current offer of PNB (RM 3.90 per share) strongly undervalues the fair price of SP Setia. The company being allowed to hand out bonuses or options should not change that opinion.

And lastly, in general there is the dangerous crowding out effect of large funds like PNB and EPF buying more and more listed companies:


Article in The Star of December 6, 2011

Permodalan Nasional Bhd (PNB) may be paying out lucrative bonuses and stock options to property developer SP Setia Bhd’s top management staff in order to persuade them to stay on with the company following an offer by PNB to increase its stake in the property developer.

A source with knowledge of the proposed arrangement told StarBiz that this would involve the payout of hefty bonuses and attractive stock options aimed at ensuring the management team stay put.

There had been fears expressed earlier that PNB’s move to take control of SP Setia might lead to an exodus of the company’s management staff.

The company had received an attached press notice from Maybank Investment Bank Bhd on behalf of PNB last Friday informing it “that PNB, Tan Sri Liew Kee Sin and SP Setia are proposing to enter into an agreement to formalise the incentives and management rights relating to the management and general conduct of the business of SP Setia group of companies subject to the approval of the Securities Commission (SC).”
Maybank Investment Bank said in a follow-up announcement to the stock exchange that the application for the proposed arrangement between the parties was submitted to the SC yesterday.

It said the “despatch of the offer document is subject to the SC’s decision on the proposed arrangement as well as the SC’s clearance of the offer document.”

As of Nov 25, PNB held a direct 14.42% stake in the company and an indirect 20.04% stake via Skim Amanah Saham Bumiputera while Liew held 10.88% stake.

SP Setia’s shares have held steady in the range of RM3.85 to RM3.89 since PNB and parties acting in concert made the conditional offer in late September at RM3.90 per share and 91 sen per warrant.


  1. I think this is totally unfair for the minority shareholder. Warren Buffett had criticed that a company should not issue stock options to reward their top perform employees. The company is belong to the shareholders! If they are bullish on the stock they should use the bonus to buy from secondary market. In this course I strongly feel that PNB should offer a higher price to acquire SP Setia not use the minority's money for their own benefit!

  2. I agree, but let's wait, I hope things are different, this is just an article in The Star. But, until now, institutions like PNB and EPF have not yet given me chance to write something positive about them, in the contrary. Will they change? I definitely hope so.