What To Do with Oddlot Shares From Stock Dividend?

Have you guys received your 30% stock dividend from MBT (Metrobank)? I received mine. Whenever I am receiving dividends from publicly listed companies, it’s always a great feeling. And it never grows old.

MBT’s price is around 80 so its board lot is 10 because its price is between 50 and 1000 pesos. Please see below board lot table.

If stock price is 1000 pesos or more	Board lot is 5
If stock price is between 50 and 1000 pesos	Board lot is 10
If stock price is between 5 and 50 pesos	Board lot is 100
If stock price is between 50 centavos and 5 pesos	Board lot is 1000
If stock price is between 5 centavos and 50 centavos	Board lot is 10,000
If stock price is between 1 centavos and 5 centavos	Board lot is 1,000,000

Let’s say I received 312 MBT shares as dividends. I can sell the 310 MBT shares at the main board while the remaining 2 shares can only be sold at the oddlot board.
When I checked the number of shares I received from MBT, I noticed that the number of shares credited is not rounded off to ten. May butal siya. 

Dreaded Oddlot Shares

So what will I do with these 2 oddlot shares? The bid and asking price for oddlot shares generally deviate from the current price of the stock considerably. To illustrate what I am trying to convey, see below BPI’s real time quote.

COLFinancial screengrab

The bid and asking price were heaven apart from each other! Yesterday, BPI price is 96.50. If you want to buy 8 oddlot shares, you need to pay 144.50 per shares, a 50 increase from yesterday’s price! On the other hand, if you want to sell your 2 oddlot shares, a buyer is willing to acquire your 2 oddlot shares at 90.15, a 7% decrease from yesterday’s price. The price fluctuations at oddlot board are quite huge.

Now, let’s take a look at the main board lot. The bid and ask spreads are reasonable. They are sensible. The bid and asking price do not deviate much from yesterday’s price.

COLFinancial screengrab

Strike While the Iron is Hot

MBT’s 30% stock dividends were distributed yesterday. The recipients include owners, institutional investors, and of course us, the retail investors. I am 100% sure that I am not the only one who receives an oddlot shares from this 30% stock dividend. Since the oddlot shares are still hot and fresh, retail investors having oddlot shares dilemma flock the market to either buy or sell their oddlot shares.  Take a look at the oddlot board of MBT today.

COLFinancial screengrab

The bid and ask spreads did not deviate much from yesterday’s price because there are retail investors who either want to buy or sell their oddlot shares. Hundreds if not thousands retail investors received oddlot shares in this 30% stock dividend of MBT. The evidence is not lying. Did you notice the number of MBT trades for oddlot today? The total is 97. That was a sizable number for oddlot shares trading. If you compare it with BPI’s oddlot shares above, BPI’s number of oddlot trades is only 3.

NOW is the time to buy oddlot shares while the price is still reasonable. In my case, I need to buy 8 oddlot shares so that all my shares can be traded at main board in the future.

Alternatively, if I want to sell my two oddlot shares, I’ll do it now while the price is still sensible. It won’t be too long before MBT’s trading of oddlot shares will exhibit absurd bid and ask spreads similar to BPI above.

What to do?

If you have oddlot shares, I suggest that you either buy or sell them NOW while the prices are still sensible and buyers and sellers abound. Since I am long term investor, I just bought 8 shares of MBT so that in the future, I can sell them at the main board and within the market’s reasonable fluctuations.

Related Reading: What Stocks Can You Buy for 5000 Pesos

Why MBT Went Down From P99.50 to P76.5?

Last August 29,2013  I opened my account in my stockbrokers online platform trading and was surprised that Metrobank (MBT) is trading at 76.5. It went down from 99.45 to 76.5, a massive fall of 23%!

Obviously I immediately investigated what had happened. I checked if it is included in the top losers of the day, it was not there.  I’m having an idea already that the 30% stock dividend was already distributed.  I checked the ex date of the stock dividend and the date was August 29, 2013. So there you go, that was the answer on why MBT massively went down.

When I saw my portfolio, my MBT stock is having more than 30% loss! Wow! Can you imagine that, a 30% loss! Since a blue chip stock like MBT doesn’t fall as much as 30% in one day, where is the stock dividend? Why it is not reflecting in my portfolio? You know seeing that 30% loss is a sore eye to me.

Last August 28, 2013, MBT price is P99.50. The following day, which is the ex date of the 30% stock dividend, the price was amended to P76.50.

In stock dividend, here are some of the rules you need to observe.

a. The market capitalization remains the same

b .Number of shares are increased by the %  stock dividend

c. Price is decreased by the %  stock dividend

Before 30% Stock Dividend
# of Shares	2,111,386,017
Price	99.5
Total Market Capitalization	210,082,908,691.50
After 30% Stock Dividend
# of Shares	2,111,386,017
30% stock dividend (2,111,386,017 x 30%)	633,415,805
Total # of shares	2,744,801,822
Price (210,082,908,691.50 ÷ 2,744,801,822)	76.53846154125
Total Market Capitalization	210,082,908,691.50

Notice that Total Market Capitalization is the same. In essence, your shares value did not change at all. The price decrease was offset by an increase in the number of shares.

The correct price is 76.53846154125. However, you will never see that price in the stock market. The allowable fluctuations for prices between 50 to 99.50 is .05 only. Thus, the rounding off 76.53846154125 is 76.50.

This is the reason why the price of MBT is 76.50 last August  29, 2013.

Currently, the price already reflects the 30% stock dividend but the 30% additional shares are not yet issued to stockholders because the payment date is on Sep 16, 2013.

Presently, you’ll see a big loss in your MBT’s portfolio but that is not a concern because you will receive additional 30% shares on Sep 16, 2013.

By the way, stock dividends are also called scrip dividends.

Mean October

Stock	Buy Below	Date Bought	Current Price	Target Price	Average Cost	Return + Dividends	% Of Portfolio
BLUE CHIP STOCKS
BDO	60.00	Sep 6, ‘12	63.10	81.00	60.10	5.00%	2%
ALI	20.00		23.20	22.50	-	0	0%
PGOLD	24.00		30.65	30.00	-	0	0%
EDC	6.00	Sep 6, ‘12	6.25	8.50	5.94	5.25%	2%
TEL	2,600		2,670	3,000	-	0	0%
AGI	11.00		15.14	15.00	-	0	0%
MBT	94.00	Sep 14,’12	92.80	105.00	94.35	-1.65%	0%
SMALL CAP STOCKS
PHES	0.740	Sep 24, ‘12	0.67	2.70	0.73	-8.77%	96%
BHI	0.158		0.145	0.510	-	0	0%
CASH						0	0%
TOTAL						-8.22%	100%
PSEi (Since Sep 6, '12)						5.48%

It looks like there is a lot of liquidity in the market due to the gains made on blue chips stocks recently. Small caps are running havoc in the market now with APM leading the way. October is a mean month in the stock market. Thus, punters tend to play on small caps randomly during this period. Also, fundies have just reported their 3^rd quarter results and are now in position to play with the other stocks for the rest of the 4^th quarter.

The Philippines is expected to remain the most promising economy in Southeast Asia as the country performs better than the regional average, according to UBS Securities.^Inquirer  Well, good news for us especially the stockholders. More foreign investments means more capital and buyers in the market that will push the price of the stocks higher.

BLUE CHIPS STOCKS

EDC – Energy Development Corp., the largest Philippine geothermal company, may form a joint venture to fund as many as six South American projects being developed by Alterra Power Corp. ^{www.renewableenergyworld.com}

TEL – I like the company’s aggressive stance in strengthening its networks and cables. The Supreme Court issued with finality that PLDT’s shares are majority owned by foreigners. ^{GMA Network} However, MVP said the PLDT has prepared for this long ago in anticipation of the ruling. The company will issue 150M voting shares to PLDT Beneficial Trust Fund. ^{Phil Star}

TEL is going nearer our buy below price of 2,600. Nice.

MBT- is being beaten due to its exposure in real estate which is almost 20% of its loan.^{ColFinancial.} Fundamentals still intact though. Nothing to worry. The upside is we can buy more at cheaper prices. 

SMALL CAP STOCK

PHES –I believe that once the JV is signed and the numbers are out, analysts will start to cover this stock and that will be the only time that will push the price high with stability. Right now let the market ignore this stock.

I trust God. I am not afraid. What can mortals do to me? Psalm 56:11