Yeo Hiap Seng

[weijian]

hi ghchua,

While scrip is open for everyone, but do you think scrip is meant for the majority shareholder, minorities or everyone? Your "reducing free float" observation will probably answer the question, isn't it?

Or another way to look at it - Have we seen any controlling shareholder declare scrip option but yet didn't take the scrip option for the majority of their holdings?

I doubt the majority shareholder would care about "support of minority shareholders" when doing scrip, ditto the free float gets lower over time. Matter of fact, lower free float justifies scrip more, so as to continue to mop up shares with less friction and on the cheap.

[ghchua]

hi ghchua,

While scrip is open for everyone, but do you think scrip is meant for the majority shareholder, minorities or everyone? Your "reducing free float" observation will probably answer the question, isn't it?

Hi weijian,

As scrip dividend scheme will never been able to attract 100% subscription rate, if majority shareholder took up their stake, it will almost certainly result in reduction of free float as years gone by, all else being equal. This is especially true for companies which did scrip dividend every year, as compared to others which did in some years only even with the scheme in place.

But you can also say the same for share buyback. As those shares are bought back and progressively cancelled, majority shareholder stake will increase as years gone by with the free float being reduced.

Ultimately, as in all things, it should not be done in extreme. With a scrip dividend scheme in place, it does give companies the flexibility to retain some cash while declaring a dividend to shareholders. However, they should not do it every year with the aim to just conserve cash, with no idea on what they are going to do with those cash, except to put in FD to generate more interest income.