Cirtek hits 'pause' on all dividends to preferred shares

Cirtek [TECH 1.13, down 1.7%; 675% avgVol] [link] announced that its board of directors held a special meeting to approve the “suspension of payment” of all the declared cash dividends from the 20 January 2025 board meeting to “manage liquidity” and “preserve its resources to ensure long-term sustainability of its business.” The suspension of payment applies to the dividends that were declared to TECH’s Preferred A Shares (unlisted), Preferred B-1 Shares (unlisted), Preferred B-2 Subseries A (TCB2A), Preferred B-2 Subseries B Shares (TCB2B), Preferred B-2 Subseries C Shares (TCB2C), and Preferred B-2 Subseries D Shares (TCB2D). It is not clear whether this suspension of payment applies only to those declared dividends, or to all dividends that may be due in later periods. TECH is owned by Jerry Liu of the Liu Family, who also owns Figaro Coffee Group [FCG 0.80, down 2.4%; 58% avgVol].

MB bottom-line: TECH has been bleeding cash for a while now. We haven’t seen the full-year earnings report yet, but the 9M/24 report showed that TECH had only generated $2.1 million in net cashflow, which was down 75% y/y, which resulted in a $21.6 net decrease in cash. While TECH suffered a net decrease in cash in the previous period, so far, this year, it’s 129% worse. TECH has used the PSE to raise several rounds of funding through the sale of preferred shares, and perhaps juggling debt in this way has finally caught up to the company. They failed to redeem the Series B2-C shares in December 2024, which caused the dividend rate to increase from 6.5864% to 14.1425%. The high debt cost plus the operational challenges in a tough, low-margin industry are pushing TECH into a corner. All of the traded prefs (not owned exclusively by the Liu Family) were down 30% (or close to it) which is the maximum one-day drop permitted by the PSE’s dynamic threshold system. 

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