Mobile World, VNG sell cheap shares to employees, investors worry about price drop

Companies have announced the sale of preferred stock to employees, causing investors to worry about stock dilution and a drop in value.

Some listed companies have announced employee stock ownership programs (ESOPs) offering shares at a lower price than the market rate. For example, Mobile World Investment Corporation (stock code MWG) will issue over 19.9 million ESOP shares in the first quarter of 2025, equivalent to 1.3642%. The issued shares will be restricted from transfer for two years from the end of the issuance period, with 50% of the purchased shares becoming freely transferable each year. The selling price for employees is 10,000 VND per share.

Many Mobile World employees are continuously able to purchase shares at discounted prices through the ESOP program.

PHOTO: MWG see

The program of selling discounted shares to employees has been implemented by Mobile World Group (MWG) for over a decade. With an offering price of 10,000 VND, employees can purchase shares at a price 50,000 VND cheaper than the current MWG share price on the stock exchange. In total, employees only spent nearly 200 billion VND to own shares worth over 1,200 billion VND. Among the more than 300 employees eligible to purchase shares in this round, Mr. Doan Van Hieu Em, a member of the Board of Directors and General Director of Mobile World Group Joint Stock Company (a subsidiary of MWG) operating the two retail chains Mobile World and Dien May Xanh, was the largest buyer with over 1.6 million MWG shares. Thus, Mr. Doan Van Hieu Em only needed to spend 16 billion VND to purchase shares worth over 96 billion VND.

At numerous shareholder meetings, investors have questioned MWG's leadership about this continuous ESOP share issuance plan. Most recently, this topic was also discussed at the February investor meeting. The company's Chairman, Mr. Nguyen Duc Tai, stated that the ESOP policy may be changed in 2025 to better balance the interests of shareholders and company leaders.

Besides Mobile World, VNG Corporation (stock code VNZ) recently announced a board resolution on its plan to issue shares under the ESOP program in 2024. Accordingly, the company will issue nearly 641,000 shares to employees at a price of 30,000 VND, which is 92% lower than the listed price of 360,000 VND per share. The program will be implemented in 2025, with a one-year trading restriction. Similarly, Duc Thanh Wood Processing Corporation (stock code GDT) will issue nearly 1.1 million ESOP shares, equivalent to 4.55% of its outstanding shares. The selling price to employees will be 10,000 VND per share, nearly 60% lower than the listed price. These shares will be subject to transfer restrictions for the first two years after issuance, and from the third year onwards, 50% will be allowed to be sold...

Many businesses use the issuance of ESOPs (Employee Stock Ownership Plans) as a policy to attract and retain personnel. Company leaders and employees who purchase ESOP shares at a very low price receive them as part of their annual income without paying personal income tax. Personal income tax is only deducted when the individual sells the ESOP shares, just like with regular stock investors (this tax deduction is very low compared to the income tax payable on annual salaries and bonuses).

Conversely, for shareholders, a company issuing a large number of ESOP shares will reduce benefits due to the increased number of shares. Consequently, earnings per share (EPS) will decrease (EPS = net profit - preferred dividends / total number of outstanding shares). The more shares there are, the lower the EPS will be if the company's profits do not increase proportionally to the increase in shares.