Big foreign investor calls for clear rules for IPO applications and allocations

A high net worth foreign individual portfolio investor yesterday called for clear rules for applications and allocations of Initial Public Offerings (IPO).

The recommendation follows after he applied for Rs. 1.2 billion worth of shares of hSenid IPO, the full value of which was only Rs. 700 million. hSenid Business Solutions successfully offered 55,339,076 ordinary voting shares to the public at a price of Rs. 12.50 per share.

Usually big institutional and HNWIs depending on the attractiveness of IPO and the fundamentals and future prospects of the company, apply for the entirety or above the full value of the shares on offer. This is done to garner a higher share allocation especially if the demand has been overwhelming.

However, the investor had got only 528,738 shares worth Rs. 6.6 million or 0.96% of the applied amount. A separate application via his spouse worth Rs. 200 million secured 152,000 shares (or 0.95% of the applied amount) worth Rs. 1.9 million.

The investor said the SEC and CSE must be explicit whether those interested could apply for entirety or more of the shares on offer. If limits are set, investors would know in advance. The fees on bank guarantees can be avoided as well as blocking funds until refunds are made.

The hSenid IPO was the most successful in recent times with 13.5 million oversubscription amounting to Rs. 9.3 billion. In this figure are the concerned investors' twin applications worth Rs. 1.4 billion. “By accommodating the applications, the oversubscription figure is boosted but at the time of allocation the original application value is ignored,” opined the investor who remains among select few who continues to remain bullish on listed equities resulting in foreign exchange inflow especially at a time when the market has seen net foreign outflow of over Rs. 50 billion.