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Inial Public Oferings (IPOs) In Philippines !"# Inial Public Oferings (IPOs) In Philippines !"#

October $% !"# In&estment 'rien by Marc Arian

IPO or Inial Public Ofering is one o* t+o +ays *or a company to get liste in a stoc, mar,et. -he other inirect +ay% +ay% is through bac,oor lisng% +hich is another topic altogether. altogether. or this arcle% +e +ill iscuss +hat an IPO is% its role in the Philippine Stoc, /0change (PS/)% an the ne+ly or 1ust about to be liste companies in !"#.

'hat is IPO2

IPO or Inial Public Ofering is the 3rst me a company4s company4s stoc,s is ofere to the public *or purchase% the issuing company being the only seller an +ith a set IPO price. -his price is announce be*ore the ofer perio% +herein e0citement in the mar,et is generate prior the gran lisng ate. A5er this process% the company becomes 6publicly7liste4 6publicly7liste4 or 6publicly7trae4 6publicly7trae4.. Once the IPO perio is o&er% the sol shares are then trae 1ust li,e other stoc,s +ith both the buyers an sellers coming *rom the in&esng public% or retail in&estors.

Small companies loo,ing to e0pan o5en use an IPO as a +ay to generate capital. Capital can be use to *un research an e&elopment% *un capital e0peniture% or e&en use to pay of an e0isng ebt. Another a&antage is an increase public a+areness o* the company because IPOs o5en generate publicity by ma,ing their proucts ,no+n to a ne+ group o* potenal customers. Subse8uently this may lea to an increase in mar,et share *or the company. At the same me% an IPO may also be use by *ouning ini&iuals as an e0it strategy. Many &enture capitalists ha&e use IPOs to cash in on success*ul companies that they helpe start7up.

Another a&antage o* ha&ing a corporaon4s shares publicly liste is the bene3cial rate o* stoc, transacon ta0 (!.9: o* the gross selling price)% as oppose to 9: to "!: rate o* capital gains ta0 impose on shares not liste +ith the PS/.

'hat4s the role o* IPO in PS/2

-he number o* IPOs being issue is usually a sign o* the stoc, mar,et4s an economy4s health. ;uring an economic o+nturn% the number o* IPOs rop because it4s not +orth the hassle to list a company +hen share prices are epresse. 'hen IPOs increase% it usually means the economy is ge
-he PS/ ine0 has recently breache the =%$!! mar, on the bac, o* impro&ing corporate earnings an the country4s economic *unamentals.

>o+e&er% +hile connuing to aract companies% the stoc, mar,et has yet to see the return o* the IPO heyay o* the "??!s or e&en prior to the !!= global 3nancial crisis +hen there +ere ouble7igit lisngs% pea,ing at " companies in "??@.

'hat are the *orthcoming an the latest IPOs *or this year2

Last year% there +ere *our IPO lisngs% comprising o* the illar *amily4s Bolen >a&en +hich raise ##= millionD Ceme0 >olings Philippines (9 billion)% Pilipinas Shell Petroleum Corp. ("=.@ billion) an Sha,ey4s (@ billion). -his year% the PS/ hopes to see any+here bet+een si0 an eight.

So *ar% companies that has gone public areE

'ilcon ;epot (# billion) Cement ma,er /agle Cement (=.F billion) Property e&eloper Cebu Lanmasters ($ billion) ;ennis Gy4s Chelsea Logiscs Corp. (= billion) inancial ser&ice aggregator /0pressPay (9= million)

Others in the pipeline inclueE

-echnology 3rm Auio+a& (.# billion) In&estment holing company Pure /nergy >olings (".9 billion) Heleb% a subsiiary o* liste gaming technology company Hurpas Inc. (#$F million) ruit sha,e chain -he ig Chill (9!! million to F!! million) >o+ to in&est in IPO4s

-here are t+o +ays to parcipate in an I PO. -he 3rst +ay is through an online bro,er subscripon.

I* you alreay ha&e a traing account +ith an online bro,er% chances are they +ill ofer some number o* shares to clients li,e you by announcing it on their +ebsite. >o+e&er% the challenge here is the limite number o* shares that the bro,er can ofer% an so allocaon o* shares is not guarantee.

I* there are more buy re8uests than the number o* a&ailable IPO shares alloe to your bro,er% a raJe is usually conucte to istribute the same. I* you o not get chosen% then you +ill en up +ith no shares o* the IPO. As such% you can try the secon metho% +hich is the Local Small In&estors Program (LSIP).

LSIP is PS/4s o+n inia&e to encourage more small in&estors to parcipate in IPO4s an a irect +ay to buy IPO shares *rom the uner+riters or a ban, or any other 3nancial instuon that pleges to buy all the unsol shares in an issue o* ne+ shares. A company going through an IPO must allocate shares *or this program. -he program is also esigne to reach out to as many small in&estors as possible +ith its 9%!!! ma0imum in&estment limit an accepts minimum boar lot. Most clients ha&e a higher chance o* securing IPO shares +ith the LSIP.

ut you ha&e to ta,e into consieraon that in&esng in an IPO is 1ust li,e buying regular stoc, an nees care*ul research. -he ,ey to pro3table IPO in&esng is to ,no+ the company behin the stoc,. Most o* the in*ormaon you +ill nee can be *oun in the IPO4s prospectusE the business moel o* the company% per*ormance o* the inustry +here the company belongs% earning po+er reliability o* the 3rm base on its 3nancial history% trust+orthiness o* the controlling shareholers% an the capability o* the members o* the management team.

Once you become *amiliar +ith the company% then the ne0t step is to e&aluate the IPO price to see i* the ofer is acceptable. Kou nee to ,no+ ho+ much you can potenally pro3t *rom in&esng in the IPO. One +ay to chec, is by ge
Consier also the li8uiity o* the IPO. >o+ much o* the company4s outstaning shares shall be a&ailable *or the public to trae2 I* the *ree oat or the proporon o* shares o* a publicly trae company that is trae in the stoc, mar,et is small% say at minimum o* "!:% then you can e0pect the stoc, to be more &olale because there are only a limite number o* shares a&ailable. >igher &olality means higher ris, because the share price can s+ing at a large percentage in a *e+ ays i* it is ac&ely trae.

I* you are in&esng *or the short term% this can be a goo opportunity *or you. ut i* you are in&esng long7term% choose an IPO +ith bigger *ree oat% say 9: or more so that there is higher stability in the

share price mo&ement. Instuonal in&estors% such as *oreign *uns% pre*er larger *ree oats so they can trae +ith signi3cant number o* shares +ithout necessarily afecng the share price.

O&erall% it is goo to buy an IPO i* you ,no+ +hat you are buying. ;on4t buy 1ust because e&eryone is going craNy about it but uy because it is a goo in&estment.

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