Sunday, 7 October 2012

Just 2% of Astro's shares to the Malaysian public at large

Another excellent column from P. Gunasegaram in The Star, some snippets:

Astro’s initial public offer yet again demonstrates how retail investors are discriminated against

Initial public offerings or IPOs these days are a misnomer of sorts. Why? Because the proportion of shares offered to the public are a tiny proportion of the total number of shares offered to gain a listing.

That's a shame at least in Malaysia where there is substantial retail demand for these IPOs, especially those which are considered to be investment grade and offer good probabilities for recurrent income and dividends on top of price appreciation.

But ironically, retail investors basically the Malaysian public are systematically and deliberately shut off from these IPOs and instead foreign and local institutions, and even some individuals are blatantly favoured in the allocation of those shares.

Out of the 269 million shares for the Malaysian public, only 104 million, just 2% of the paid-up capital or just under 7% of the offer shares was allocated to the Malaysian public at large, hardly an initial public offering.

And here's the interesting part, the public issue for the 104 million shares was oversubscribed more than six times. That means the Malaysian public was prepared to subscribe for 624 million shares, even when they knew the chances of getting an Astro share was small.

Should they not be given a far better chance of getting Astro shares?

Perhaps what is most galling about the entire thing is that there is a system by which fair allocation can be made to retail investors. The solution is quite simple.

Just wait for all the responses, both institutional and retail, for the offering and then allocate it fairly according to a publicly disclosed formula instead of setting the proportion for retail at a ridiculously low level way in advance.

I hope that one day, when the dust is settled, research is done how things panned out, how long those "cornerstone" investors actually held on to those shares, how much profit they made, etc.

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