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19 October 2020 (closed)
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Trading in shares of Bakrie & Brothers, which are listed on the Indonesia Stock Exchange, have again been suspended by authorities (for the second time this month) due to a massive decline in the share price. The plunge occurred after Bakrie & Brothers conducted a 10:1 reverse stock split in late-May 2018. Through this corporate action the company reduced the total number of its outstanding shares.
Earlier Bobby Gafur S. Umar, President Director of Bakrie & Brothers, had informed that the reverse stock split is actually part of an agreement with one creditor (which is also a shareholder) related to the restructuring of the company's debt (that it owes to the creditor). However, Umar was reluctant to disclose the name of the creditor. For the ordinary retail investor, however, the reverse stock split is risky.
Indeed, two big sell-offs that occurred after the reverse stock split led to two temporary trading suspensions. First the Indonesia Stock Exchange suspended trading in Bakrie & Brothers shares on 8 June 2018 after shares tumbled 34.59 percent. The suspension was lifted on 20 June 2018. However, the following day the Indonesia Stock Exchange again suspended trading in the company's shares after they tumbled 32.69 percent (it remains unclear when this latest suspension will be lifted).
Apparently, various shareholders consider it the right time to exit the company amid reduced liquidity. Moreover, the fundamentals of the company remain weak. Bakrie & Brothers reported a IDR 336.7 billion (approx. USD $24 million) net loss over the first quarter of 2018 (weakening from a net loss of IDR 155.0 billion in the same quarter one year earlier).
For many years already Bakrie & Brothers has been plagued by debt woes. Therefore, debt restructuring is high on the company's agenda. In 2016 and 2017 Bakrie & Brothers had successfully restructured debt it owed to Credit Suisse worth IDR 1.37 trillion (approx. USD $98 million) and IDR 1.04 trillion (approx. USD $74 million), respectively. However, the company's debt obligations still amount to around IDR 7 trillion (approx. USD $500 million) in the second half of 2018.
As long as Bakrie & Brothers' corporate earnings show no significant improvement (especially related to negative equity and net loss) and there remains uncertainty about future debt restructuring, investing in the company's shares is a very risky affair. Once the latest trading suspension has been lifted, we would not be surprised to see another decline in the share price. We also emphasize that it will require a long process for the company to improve its corporate earnings because - as a holding company - it is dependent on the performance of its (many) subsidiaries.
Stock Quote Bakrie & Brothers - BNBR: