Abundance of IPOs deals blow to investors

The OTC market had not yet recovered from the two big IPOs by the Phu My Fertiliser and Bao Viet when it received another ‘blow’, the IPO of 10mil shares by PetroVietnam Insurance (PVI) on June 26.

Before the PVI auction on June 26, PVI shares were traded at VND110,000/share on OTC market. The price dropped dramatically on June 27 after the final average price of the auction at VND75,499/share was announced. On OTC websites, PVI shares are being offered at VND75,000/share.

A lot of other OTC share items got involved in the misfortune when the prices dropped dramatically and they are unsalable because investors fear that more IPOs will take place in the coming time.

PVI shares have become the obsession of many investors as they set a record in price decrease, though PVI announced impressive business performance. Le Van Hung, Chairman of PVI, said that PVI expected to obtain the turnover of VND1,768bil, or more than $100mil.

There are two ways for investors to go now, either to hold shares with the hope that the PVI share price will increase when they are listed, or to sell the shares right now for fear that the price will further decrease.

In fact, PVI’s price has decreased not because PVI’s business is bad, but because of too many commodities on the market.

Experts have warned that if the IPOs of big corporations took place in the time to come as previously planned, the supply of securities will far exceed the demand, which will result in the dramatic drop of prices and the fall of the market.

Kim Thanh, an expert with the State Bank of Vietnam’s Monetary Policy Department, said that 40 IPOs had been made so far this year, with 451mil shares sold.

Soon after the IPO by PVI on June 26, Vincom will sell 5mil of shares to the public in early July at the starting price at VND80,000/share. Other IPOs will come in August (Vietcombank), October Mekong Housing Bank (MHB), while other big corporations have announced IPOs for the fourth quarter of 2007, including MobiFone and Sabeco.

A question has been raised: do investors have enough money for the large and massive number of IPOs?

Phan Vu Hung, an investor in HCM City thinks that enterprises should delay their IPOs. He said that domestic investors would not have money to buy all the shares to be issued, especially with commercial banks limiting loans for securities investment.

Ngoc Lan, an investor on Bao Viet Securities Company’s trading floor, said that a massive number of IPOs would cause indigestion in the market and not bring much money to the securities issuers as public capital is not unlimited.

Unlike the IPOs made last year, the final prices from this year’s share auctions are just a bit higher than the starting prices. Several issuers have to organise auctions twice as they cannot sell all the shares in one auction. The Phu My Thermo Power Company, for example, had 4.8mil unsold shares after the first auction, while the percentage of Thac Mo Hydropower Plant’s shares left unsold accounted for 38%.

Tran Bac Ha, Director General of the Bank for Investment and Development (BIDV) has warned that at least six IPOs of big corporations will take place from now until the end of the year. Mr Ha said that the IPOs will make supply far exceed demand, thus badly affecting the market.

Source: VNE