Virus surge clouds outlook for IPOs

By Keren Concepcion G. Valmonte, Reporter

THE ONGOING SURGE in coronavirus disease 2019 (COVID-19) infections in the country is clouding the prospects for upcoming initial public offerings (IPO). 

This as residential developer Haus Talk, Inc. and Figaro Coffee Group, Inc. are scheduled to make their Philippine stock market debut this month.

COL Financial Group, Inc. Chief Technical Analyst Juanis G. Barredo said the market has been factoring in the latest COVID-19 surge and the “more hawkish” stance of the US Federal Reserve, which may have contributed to the recent “lackluster volume” at the stock market.

“IPOs during this time may not get the multiplier effects they would have wanted as demand levels would clearly be impacted,” he said in a Viber message on Friday.    

“This may drive some difficulty in listings during this period as volume levels remain stunted as we have two headwinds to deal with at the time being,” he added, referring to the COVID-19 surge and the looming interest rate hikes in the United States.

The US Fed is widely expected to raise interest rates in March, and start reducing its asset holdings. There are worries of a repeat of 2013’s so-called “taper tantrum,” which led to sharp capital outflows from emerging markets like the Philippines.

The Philippines is in the middle of another COVID-19 wave, with new daily cases hitting 28,707 on Sunday. Active cases reached 128,114 with a 44% infection rate.

“Analysts [would] keep an eye on the increasing COVID-19 cases in the country and how this may affect the government’s policies on movement restrictions,” Timson Securities, Inc. Trader Darren Blaine T. Pangan said in a separate Viber message on Friday.

However, First Metro Investment Corp. (FMIC) Head of Research Cristina S. Ulang said the PSEi remains “resilient” and this would be the “cushion” for upcoming public offers.

“PSEi looking resilient above 7,000 due to high vaccination rate and this will be the cushion for IPO, keeping investors’ attention and interest to buy on dips,” Ms. Ulang said in a Viber message on Friday.

The Philippine Stock Exchange, Inc. (PSE) just saw a record year in fundraising activities. In 2021, firms raised a record P234.48 billion at the local bourse through eight IPOs, 11 follow-on offerings, four stock rights offerings, and eight private placements.

This year, Haus Talk, is set to make its debut on the PSE’s small, medium, and emerging (SME) board, tentatively set for Jan. 17.

Figaro Coffee Group, Inc.’s offer period starts on Monday (Jan. 10) up to Jan. 14. The company will list under stock symbol “FCG” on the main board of the PSE on Jan. 24.

San Miguel Corp.’s Bank of Commerce, Citicore Energy REIT Corp., and CTS Global Equity Group, Inc. are waiting for regulatory approval for their IPOs.

Meanwhile, Balai ni Fruitas, Inc., North Star Meat Merchants, Inc., and Ovialand, Inc. have expressed interest in raising funds through the stock market this year.

The Villar group is also planning to launch its own real estate investment trust through Vista Land & Lifescapes, Inc. and “small IPOs,” depending on market conditions, for some of its brands such as Coffee Project.

“Although each public offering may be considered unique, market sentiment may also play an effect to investors looking forward to participate in IPOs and existing issues’ growth stories in the local bourse,” Mr. Pangan said.

FIGARO ‘CONFIDENT’
Meanwhile, Figaro Chairman and Director Justin T. Liu said he is not concerned with the timing of the offer, expressing confidence in the company’s brands and products.

“We’re not in the ‘market timing business.’ We’re really more of looking long term so we’re looking to use this capital to grow our company, we’re not really looking at what will happen to the stock on opening day or on the week after,” Mr. Liu said at an online investor’s briefing on Jan. 6.

Figaro plans to use net proceeds from its P767.39-million IPO for store launches and renovations, commissary expansion, debt repayment, and investments in the company’s digital infrastructure.

Figaro and Camerton, Inc. assigned PNB Securities, Inc. as the stock’s stabilizing agent. PNB Securities may purchase up to 93.016 million common shares from the institutional offer for 75 centavos apiece within 30 days upon its listing.

A stabilizing agent is engaged “for the sole purpose of preventing/minimizing reduction in market price of the shares,” the Securities and Exchange Commission (SEC) noted in a document dated Jan. 4. The overallotment is also not allowed to go beyond 15% of the base number of shares sold by the issuer.

The “initial stabilizing action” is directed to start once the stock price falls below its initial offer price. However, if the stock’s price falls further, the next trade will be “below the initial stabilizing price.”

One of the last IPOs last year, Medilines Distributors, Inc., crashed 30% on its first trading day. The Villar-led firm did not arrange a stabilization fund for the offer. 

The SEC has ordered Figaro and PNB Securities to record all details of stabilizing transactions. A weekly disclosure of price stabilization activities within the 30-day period is required.

In addition, the SEC also “directed” the company and the stabilizing agent to submit a report within 15 days from the end of its stabilization period.