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Firms consider the wisdom of holding IPOs
Many State-owned enterprises are debating whether or not to hold initial public offerings (IPO) with the market already saturated and investors discouraged with trading.
“Investors are no longer eager for public auctions, due to cash shortages and the sluggish exchange,” Nguyen Tien Dung, an independent analyst, said.
He also said that State firms were facing difficulties and were therefore unable to persuade investors to pump in needed funds.
Presently, the market was stuck in a cycle, he said. First, equitised firms offered shares publicly and then the average IPO price was set as the offering price for selecting strategic partners.
“It’s okay if the local firm is a really strong company, and its partner also has sound financing, enough to afford the purchase,” Dung noted.
In cases where the partners see that the offering price is higher than the actual price, they decline the purchases and local firms are left without partners.
Dung took Vietcombank as a typical example.
John Nolan, another analyst from a Ho Chi Minh City-based fund management company, argued that IPO’s could and did do well in the present climate.
He asked, “Why do Vietnamese firms have to auction before listing? Why must they conflate the [prices]?”
He explained that Vinpearl was in a unique situation when the company listed shares without having made an IPO. “The shares are still falling, but at least, the downtrend is not as significant as with other companies,” he said. “If you’re wise, you’ll realise that now is a good time for an auction. Now, that the VN-Index has fallen so low, it is a base for unequitised firms to define share prices.
“When investors see good stock at an affordable price, they re-engage in trading.”
“The equitisation of State-owned firms is set for completion by 2010. So it’s hard for them to wait until the market looks brighter. The challenge is to make their shares attractive for investors even as the market is doing badly,” said general secretary of the Vietnam Association for Securities Business Nguyen Thanh Ky.
Ky also said that enterprises must work with well-known appraisers to set value, in order to decide on reasonable public offering prices.
“Share prices that are too high or too low make investors nervous, or make them drop out of the bid. It’s very damaging for enterprises.”
During stockholder meetings this year, many equitised firms said they planned to list shares on the official market despite the likely challenges.
“It’s hard to receive support from investors now because they are coping with their own losses. However, we also have our stockholders who are suffering daily losses on the market because the share is losing value,” said an anonymous official from Vietinbank who planned to list shares by the end of this year.
Noland said that listing offered needed opportunities for investment.
“Traders can grow bored with the familiar, and may want to try something new. So why delay the listing?”.
Nolan said that a new, good stock could rouse investors, provided it had demonstrated financial abilities and engaged in transparent business practices.
VNA
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