ANALYSTS believe initial public offerings (IPO) at this time are risky because of the volatility of the market and sensitivity of investor sentiments to the coronavirus disease 2019 (COVID-19) pandemic.
Grocery operator MerryMart Consumer Corp. of businessman Edgar “Injap” J. Sia II is reportedly planning to pursue its P1.6-billion IPO and will list on the small, medium and emerging (SME) board of the Philippine Stock Exchange (PSE).
However, analysts said IPO plans have to be carefully assessed as the market is not in prime condition at the moment. The PSE index has been trading within the 4,743-5,946 range since March 20, down from its 52-week high of 8,419.59.
“At this time in the market wherein the pandemic causes a lot of economic losses and demand for economic activity is down, it would not be a good move to go into IPO,” Diversified Securities, Inc. Equity Trader Aniceto K. Pangan said in a text message.
He added most investors are on the sidelines due to uncertainties and on recession fears, which may make it extra challenging for a company to launch a public offering.
Based on its application approved by the Securities and Exchange Commission in March, MerryMart is planning to do a primary offer of 1.59 billion shares priced P1 each.
Philstocks Financial, Inc. Research Associate Claire T. Alviar said unlike in usual times, investors might not be as interested in IPOs at the moment.
“I think some, particularly small investors, will consider staying on the sidelines — given the uncertainties on COVID-19 pandemic — or they could look for other bargain stocks in the market to position, instead of risking into something that is not yet fully evaluated,” she said in a text message.
Specifically for MerryMart, she said some investors may still be interested, but not as much as they would’ve been before the pandemic. “Interested investors could be those who want to diversify their portfolio,” Ms. Alviar said.
For Mr. Pangan, even though MerryMart’s business deals with essential retail, an IPO right now may not be the best move for the company.
“There are lots of competitors with no and not much differentiation in the business [of MerryMart],” he said. “With demand down due to lesser economic activity, the bottom line will definitely be down too due to increased layoffs.”
While MerryMart may not have a problem with sales, Ms. Alviar said the company could have an issue with its growth prospect, since almost all businesses are expected to have a difficult time expanding during the pandemic.
“They could face hurdles in construction and in finding people to work in their company. Aside from that, its employees are still at risk of getting infected,” she said.
But if anyone were to succeed in doing an IPO at this time, Ms. Alviar said it is likely to be those in the food retail and telecommunications sectors, as these companies are sustaining, if not growing, consumer demand during these unique times.
The Philippine Stock Exchange, Inc. was initially targeting six IPOs in 2020, an increase from the four listings it recorded in 2019. These are Kepwealth Property Phils, Inc.; Axelum Resources Corp.; AllHome Corp.; and Fruitas Holdings, Inc. — Denise A. Valdez
