$SUN shareprice skyrockets! [Why? A Newbie Guide]

In my previous post, there is a speculation about the strategy of AGI companies, specifically, when Suntrust Home Developers (SUN) was left as a shell company, theoretically for a greater purpose. These speculations have come to life, and are continuing to do so when SUN has just announced that it's allowing existing shareholders to subscribe to 2.5x more  shares.

If you are a shell company, a company without asset, why would you want your shareholders to subscribe more? It means the owner is eyeing for a profitable venture and a backdoor is in place. Backdoor is a way for non-listed companies to be listed in the Philippine Stock Exchange. This is done because listing from scratch or Initial Public Offering (IPO) is quite expensive to do compared to just acquiring a shell company that is already listed in the exchange.

Before the disclosure was announced, SUN was trading around 0.57-0.60. No one knew then when a backdoor will be in place, or if it will ever occur, so the share price of SUN went down. When the disclosure was announced that additional shares will cost P1.00 each, that's the signal that a backdoor will occur soon! SUN's share price skyrocketed.. immediately you will think that a SUN's stock price will be valued at least P1.00 so those who bought below P1.00 were fortunate. SUN's share price reached ceiling price immediately. The next day it also reached ceiling, and today it's still up but no one knows for sure how high it will go.

The disclosure states that only existing shareholders can buy additional 2.5 shares. This means if you own 10,000 SUN shares, you can buy 25,000 more shares at P1.00 on SRO. The fact only existing shareholders can buy more shares adds to the buying pressure, that's why SUN's price is going beyond P1.00. There's an increased demand to have shares of the company (EVEN IF WE DON'T KNOW WHAT ANDREW TAN IS PLANNING). We're just trading in good faith that Andrew Tan won't let us down, that it might be Emperador that will backdoor SUN. Some are just trading for the play of instant money, well I think most are.

I don't know how high SUN will go up. Today, it's kinda shaky: it's reaching ceiling but sometimes the price goes down also. If big players are playing SUN, or maybe there's just a big demand for it, then it can still go up beyond P1.90 (Today's ceiling is P1.90).

So who will the backdoor company be? My gut tells me it's Emperador. The SUN is up and everyone seems happy, but for how long? When SRO has an Ex-Date, the share price will probably go down the day before ex-date, similar to dividends' ex-date case.

Deadly Speculation on AGI companies $SUN $MEG $GERI $ELI

[See Aug 14, 2013 update at the end of this post]

Disclaimer: Speculation is the mother of all evil so act at your own risk. The statements below are purely speculative.


In quick summary: My speculation is Alliance Global Inc. (AGI) properties would be merged into one, the surviving entity will probably be Megaworld Corp. (MEG). Suntrust (SUN) will be left as a shell company for a more profitable venture (to be backdoored, Emperador? Travellers? Dunno).

AGI will hit two birds with one stone if it were to do this. SM already did it, merged its property units to SM Prime (SMPH), which will make SMPH larger than Ayala Land (ALI). To be competitive, AGI may need to do the same with its property units Global-Estate Resorts (GERI), Empire East (ELI) and Suntrust (SUN). In the merger, ELI and GERI will benefit from this (much like what happened to SMDC and HP). SUN already sold its property stake to MEG, which spurred speculations (SUN's share price up by 30%-40% today).

So why not just merge SUN with the others. It may mean AGI has bigger plans for SUN. There was a rumor before that Travellers International (Part owner of Resort's Word) will use SUN as a backdoor which lead to SUN's price to shoot up, but the rumor was silenced when AGI disclosed that Travellers Group filed for its IPO (means it won't use a backdoor listing).

Now, SUN is more or less a shell company when it sold its property stake to MEG. What is the purpose of this? Could be used as a backdoor for Emperador? Or maybe Travellers changed its mind? But in any case, the speculation is that it's highly probable, SUN will be used as a backdoor for another company.

[Update Aug 14, 2013] Seems the speculation above is coming to life. AGI announced property mergers, CHECK! SUN was left as a shell company, CHECK! And now, SUN just released a disclosure that allows existing shareholders to buy additional 2.5 shares at P1.0.

This clearly indicates a backdoor is brewing. Why? If you have a shell company, a company without assets, why would you conduct a stock rights offering. It means there is a motive to revive this shell company ito a profitable venture. The question, again, is who will it be? Emperador? Nobody knows yet since it's not included in the disclosure, which means more speculation and hype!

If you can buy SUN below P1.00 it MIGHT be a good buy, but I doubt you will be able to buy shares below P1.00 (if people know the value of their existing shares)

The story behind $SUN and some analysis

Suntrust Home Developers, Inc. (SUN) is run by Andrew Tan, which, as many of you already know, also runs AGI, MEG, ELI, and GERI.

There's a rumor circulating that SUN could be used as a backdoor for Travellers International Group (a joint venture between AGI and Genting Hong Kong, owners of Resorts World Manila and are also set to build the new Resorts World Bayshore).

Does this make any sense? My personal opinion: YES, it does. IPO is expensive, maintaining a listed company is also expensive, so it's a win win if Andrew Tan already owns a listed company that can be converted into a more profitable venture.

Conglomerates are now thinking of merging their property units, it's also possible that AGI is also thinking of merging its own property units MEG, ELI and GERI. Since SUN only has a small portfolio, it may be excluded from the merger.

If you look at SUN's history, however, you'll notice that it has a shady background before it became the SUN we know today. Before SUN changed its name in 2002, it was the controversial BW Resources (Symbol: BW). In 1999, its share price skyrocketed from P2 to P107 (5K% increase) when a rumor spread that Stanly Ho, a bigtime Macau casino operator, was investing in BW to build a Casino in the Philippines.  Stanly Ho even made an appearance in the Philippines which further contributed to an increase in BW's share price.

The deal never went through and BW's share price plunged. According to PSE's investigation, it was stock manipulation through wash sales in which the buyer and the seller are the same to deceive investors that the stock is active and profitable. Allegedly, cronyism played a major role in this scandal. Dante Tan (Major shareholder of BW) and JV Ejercito were business partners and friends.

Today, the motive may be more legitimate, and the deal may more likely push through but who really knows? No one yet. As of writing, AGI is neither confirming nor denying it. Its latest disclosure is vague, stating that Traveller's Group is looking at both debt and equity market for its financing.

However, there's another twist to the story. Remember Stanly Ho? He still owns a chunk of overvalued shares in BW Resources which is now SUN. It is also possible that this is just a way out for him, jacking the price up for profit or just to get his investment back. Again, who knows! Either way, SUN's share price would go up.

CAVEAT! Just a personal opinion, there's no guarantee in this analysis. Agree or disagree? Share it in the comment section below :)


Source 1, Source 2, Photo from archian, Special thanks to my mentor