A not insignificant chunk of Honda (NYSE:HMC) shares will be sold early next month as Japan's Banks' Shareholdings Purchase Corp. [BSPC] unloads its position valued around ¥175 billion ($1.45b at ¥121/$1) as of today's ¥4,620 close.
BSPC was established in 2001 to purchase equity holdings from banks to reduce their substantial cross-share holdings.
BSPC will be selling 37.56 million Honda shares at a price between 90 to 100% of one of the March 1-6 closing prices. This represents about 2% of Honda's shares outstanding.
I calculate the average daily trading volume of Honda's ordinary shares to be about 7 million this year. That means it will take about a week of trading for the market to absorb these shares. Honda reports the offer period will start on the 1st business day and end on the third business day after the offer price is determined. Watch closely then between March 1st - 9th.
Honda says the purpose of the secondary sale is "to enable more individual investors to hold the shares of common stock of the Company."
Honda was one of the first Japanese companies to take advantage of a new securities law permitting quarterly dividend payouts as opposed to the traditional interim and annual payments. In fact, it is one of the most shareholder friendly firms in Japan I'm aware of -- it has also been active in share buybacks and retirement of treasury stock.
Another positive development for Honda is the continued weak yen, even following the BoJ's rate hike yesterday. This especially helps its ordinary shares, and eventually when the yen strengthens it will boost its ADRs (assuming one bought when its ADRs were relatively cheaper due to the weak yen).
Honda's shares have been under some selling pressure following the announcement of the secondary offering two days ago. A short reversal in the yen following the G7 meeting and profit taking are also part of its recent decline. I expect Honda to trade flat or slightly lower ahead of the offer pricing. I would assume at least some sort of discount to the closing price when the shares are sold. Therefore, if you have been considering buying Honda, this could be a good opportunity via its ADRs. Again, watch closely from now and especially between March 1st - 9th.
Source: Honda notice [pdf]
Disclosure: The author does not own shares of Honda.
Honda Motor Co. (HMC) 1-year chart: