Poland’s largest IT company has made an interesting corporate manoeuvre that sheds light on its incentive strategy and investor return policy. The Extraordinary General Meeting of Asseco Poland abandoned the planned redemption of its own shares, opting instead for a solution that provides much greater financial flexibility. Instead of a share capital reduction, the company has created a massive capital cushion.
The decision follows a pragmatic approach to managing the company in a highly competitive market. As recently as February, key shareholders, including Adam Góral’s Family Foundation and TSS Europe, had called for a relaxation of the redemption scale from the original 3 per cent to just 1.3 per cent.
Their argumentation is typical of mature Silicon Valley entities or global technology leaders. Leaving a pool of treasury shares in the company serves as a necessary tool for the long-term alignment of management interests with shareholder objectives.
From a market perspective, however, the engineering within the company’s equity is most interesting. Shareholders voted a massive transfer of funds, shifting more than PLN 986 million from the reserve capital to the capital reserve.
As a result, the latter rose to an impressive PLN 1.15 billion. At the same time, its formal purpose was changed, making it a dedicated treasury for future financial transfers.
The funds thus accumulated will have the flexibility to be used to pay traditional dividends, advance anticipated profits at the end of the financial year, and possibly fund future share buybacks. The company has also reserved the possibility of further injections of this capital in the future.
Asseco is showing that although it is moving away from immediately increasing the value of individual shares by pulling shares from the market, it is still prioritising the sharing of cash generated. This is a classic business compromise.
The market does not receive a one-off, mechanical increase in valuation due to fewer shares outstanding, but in return gains the solid promise of a stable dividend policy secured by more than a billion dollars of capital. At the same time, it gains confidence that the management will be adequately motivated to continue building the company’s value in the long term.
