Why was DXG stock massively sold off?

Investors hurried to sell DXG shares throughout the trading session. There were no buy orders on the board at the end of the session, and more than 15 million shares were still unsold.

On that day, DXG's total trading volume exceeded 53 million shares, which was the largest one-day volume in the previous year. This amount is four times the annual average of daily trade volume.

DXG's stock price fell to VND 16,450 per share as a result of the massive sell-off.

The sell-off occurred amidst the company’s recent announcement of plans to issue over 150 million shares to existing shareholders at VND 12,000 per share, utilizing the rights issuance method.

The company aims to raise over VND 1.801 trillion from the issuance. The funds will be allocated toward investment in Dat Xanh’s subsidiary, Ha An Real Estate Business Investment JSC, and settling other liabilities and expenses.

Specifically, DXG plans to inject VND 1.559 trillion into Ha An Real Estate Business Investment JSC via two other entities: Hoi An Invest JSC (VND 802 billion) and Ha Thuan Hung Construction - Trading - Services Co., Ltd. (VND 757 billion). The remaining funds will be used to settle bond debt (VND 221 billion) and repay nearly VND 22 billion owed to FPT Corporation.

The State Securities Commission (SSC) recently imposed hefty fines on Dat Xanh Group for misappropriating the profits of a public securities sale. Without the consent of shareholders, the business used more than VND 36.5 billion of the VND 1.220 trillion it had raised to pay back loans to Ha An Real Estate Business Investment JSC.

For this violation, Dat Xanh was fined VND 350 million by the SSC. Additionally, the company must rectify the issue by obtaining shareholder approval for changes to the use of funds raised in the most recent public offering.

Furthermore, Dat Xanh was fined VND 100 million for failing to disclose mandatory information and VND 65 million for incomplete disclosure of required information.

In Q3 2024, DXG recorded VND 1.013 trillion in net revenue, a 17% decline compared to the same period last year. Post-tax profit was VND 73 billion, a 34% decrease year-on-year, while net profit dropped to VND 31 billion, a sharp 54% decline. The company attributed the drop in Q3 profit to slower product delivery.

For the first nine months of 2024, DXG's total revenue reached VND 3.204 trillion, a 39% year-on-year increase. Post-tax profit was VND 244 billion, up 63%, primarily driven by a strong Q1 recovery after a loss of over VND 100 billion in the previous year. This performance allowed the company to achieve 82% of its revenue target and surpass its full-year profit target for 2024.

The sell-off in DXG shares immediately followed the announcement of its rights issuance plan. Investors appear to be concerned about the potential dilution of shares, which could lead to a decline in market price. Additionally, the accumulation of negative news surrounding the company has tested investor patience, prompting a rush to liquidate holdings.

Analysts claim that the risk of share dilution frequently materializes when an abrupt increase in supply causes the stock value to drop and raises possible cash flow issues in the market. Furthermore, issuance plans don't always work out the way they're supposed to. Due to bad market conditions or a lack of appeal in the company's prospects, some firms have had to postpone or abandon their plans for issue, while others have been unable to draw in investors.