Now may not be the best time to hold an initial public offering (IPO) or issue additional shares given recent stock failures as the securities market heads further into chaos.
For example, Song Da Industrial Zone and Urban Development and Investment JSC attempted to auction six million additional shares on the Ho Chi Minh City Stock Exchange (HOSE) on August 10 at an initial price of VND235,000 a piece.
Only 26 investors - 22 retail and four institutional buyers - ordered a minuscule 489,600 shares, leaving over five million unsold.
"The current situation [with regard to securities listings] is understandable given the stock market has cooled since the end of last year and investors are no longer as hungry for shares," said a Kim Long Securities analyst.
Companies have even been forced to hold secondary auctions attempting to offload unclaimed or abandoned shares.
In early August, Vincom held a secondary bid for 25,000 shares, while PetroVietnam Insurance sold 810,000 shares in a repeat sale after investors refused to buy the stock during its IPO in June.
The biggest embarrassment, though, was Bao Viet - once hailed as the bourse's next blue chip - which sold only 2mil of the 15mil shares up for sale during their secondary auction.
The golden days when thousands of investors use to clamber for IPOs and new shares have passed.
Nguyen Quang Huy, deputy director of Bao Viet Securities, said when the market was hot stock prices surged on the back of investor expectations. As a result, buyers submitted exorbitantly high bids for new shares.
The trend caused a panic among institutional investors who saw stock prices grossly overvalued, and eventually the bourse hit an adjustment phase, with which investors are still trying to cope.
Small market players have since learnt their lesson and are now more cautious in their bidding strategies, said Don Lam, a VinaCapital fund manager.
Given the current state of the market, some investors are even opting to avoid auctions altogether and wait for the stock to begin trading on the exchange.
Hoang Long, an investor with SSI, waited until Royal International shares, which were sold for VND183,000 a piece during its IPO, entered the market. The stock is now around VND141,000.
Analysts attribute the recent abysmal performance of public offerings primarily to monetary tightening and poor consulting services by brokerages.
A Kim Long Securities analyst said the State Bank of Viet Nam policy to cap lending on securities investments to 3% of total outstanding debt among commercial banks has strangled investor access to capital. As a result, many investors simply can not take part in auctions.
"Moreover, investors are repulsed by public offerings due to low liquidity in many shares," the analyst said.
Vu Hoai Chang, head research and investment at SME Securities, also blames a lack of experience among brokerages in rousting investor interest in public offerings and supplying adequate consulting.
"Consultants play a decisive role in the success of an auction," said Chang. "Consulting services help issuers pick suitable times to host IPOs, set reasonable initial prices and often ensure auctions are financially beneficial by buying a certain per cent of the stock if shares go unsold."
Failure to sell all the shares in an auction not only has a psychological impact on the stock but impacts a company's ability to raise capital for necessary investments and expansion projects, said Chang. Companies, therefore, must choose a consultant carefully.
The current problems on the stock exchange, though, will not last forever, and analysts remain upbeat over the fact that investors have become more cautious in bidding during public offerings.
Source: VNE
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