Will There Be a Revival in the IPO Markets Soon - 170612

7/31/2019 Will There Be a Revival in the IPO Markets Soon - 170612

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Will there be a revival in the IPO markets soon? - 180612

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Will there be a revival in the IPO markets soon?Sunday, June 17, 2012 / The Analyst / Proshare Research

Initial Public Offerings (IPOs) always held out an attraction for capital markets for one,it is the clearest indicator of a performing regulator focused on market development andlinkages between the economy and the bourse.

At its core, it validates the foundational premise that the capital market represents themost important platform for raising cheaper funds for business to fund expansion andbuild a nation.

This premise is changing. Indeed, the role definition of the capital market has beenexpanded as we have sounded often and the Nigerian market must recognise this andconfigure it into the changes taking place to be able to truly reposition the market.

Flashback to 2006 2008 when IPOs were virtually dropping from the sky; albeit undera poor regulatory environment - a position exploited by the market elite, who tookadvantage of the enthusiasm of investors and the compromised regulatory structure to

exploit the boom.

Category 2006 2007 2008 2009 2010 2011 2012 Total

Initial Public Offer ( New Issues) 62 5 21 0 0 0 ? 88

Public Offer (New Listings) 10 22 4 14 4 NA ? 54

Rights Issues 7 20 5 2 4 NA ? 38

Total 79 47 30 16 8 0 ?

180

The Nigerian Capital Market 2006 - 2012

Grand Total

Austin Laz-listed by introduction in Exchange in 2012

Source: Proshare Research/NSE

By 2008 when the crash occurred, the IPO market has not been able to make any

recovery. The investing public has little confidence in such as most are now trading atN0.50k, delisted or facing going concern issues. The fact that the regulator failed theinvestor, did not undertake any post offer/listing assessment and sanctioned no one forprofessional responsibility the confidence, trust and integrity of the vehicle iscompromised.

However, the reality with the IPO market is not just a function of our peculiar

irresponsibility. Globally, the appetite for IPOs has flagged in many nations economiesas well.

After years of holding the top spot for the amount of money raised from initial public

offerings world-wide, Hong Kong's stock exchange's hold on new shares has droppedsharply this year. So far in 2012, Hong Kong is in eighth place, with $1.4 billion raisedthrough IPOs on its exchange, down from its position as No. 1 in the past three years.According to the Wall Street Journal, the Nasdaq Stock Exchange, New York Stock

Exchange and Shenzhen-Chinext are currently in the top three slots.(http://online.wsj.com/article/SB10001424052702303822204577464263469270318.html).

Early in 2012, 24/7 Wall St. evaluated and compiled a list of top IPOs to watch for in

2012 (http://www.leap29.com/sector_reports/view/27). The highly pitched Facebook offer, touted asthe mother of all tech IPOs made the list; is still on a continuous southward move sincelisting (http://news.cnet.com/8301-1023_3-57441887-93/how-facebooks-zucked-up-ipo-just-killed-the-tech-bubble/).

The question now becomes legitimate to ask - Will the Facebook offer kill the IPO marketfor 2012? (http://www.businessweek.com/videos/2012-06-08/did-facebook-kill-the-ipo-market-for-2012). Only time


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will tell as the stock which was listed at $38 IPO price has gone down by $10.6 to $27.4as at 12th June, 2012, representing a loss of-27.89%in a matter of weeks.

Other Comparative Examples across the Globe

The Brazilian market, well known for its boisterous level of IPO activity is reportedlyfacing a hard year.

Recent reports affirm that European stock markets are open for deals again after aneight month drought but with investors still hurting from last year's poorly performingflotations and many companies not expected to be ready until later in the year, the

recovery may be slow as an intensifying euro zone debt crisis rattled stock markets andinvestors.

Germany may be the strongest country in the troubled euro zone. But it has a wholehost of its own problems. The country's erstwhile strengths have now become its majorweaknesses. Exports currently form over 40% of its GDP. German exports will thus beaffected as Europe forms about 60% of its market. A Greek default by itself would result

in direct losses to Germany of about 90bn. These potential losses would increaserapidly as more countries default in the euro zone. Germany's debt levels are about 81%of GDP. This is expected to remain above 60% for many years, and slowing GDP growthwill not help matters much.

Spain, Europes fourth largest economy, asked finance ministers from the 17 euro zonecountries to rescue its banks, which have been crushed by bad land and property loans.The bailout was reported to have soured investors sentiments just hours after Europeanand Asian stock markets were buoyed by a massive 100bn euro debt deal.(http://news.sky.com/home/business/article/16244910).

Looking Inwards - Nigeria

Back to the Nigerian IPO Market, a brief look at forty (40) stocks listed between 2008and 2010 reveals that thirty-seven (37) out of those stocks are trading below theirlisting prices while the remaining three (3) is trading otherwise. Twenty-one (21) of such

stocks are currently trading at the nominal price of 50kobo.

Compan(ies)ListingDates

No ofSharesListed(bln)

ListingPrice

CurrentPrice(15-Jun-

2012) % Return

PNG 17-Mar-09 4,579.78 6.61 7.28 10.14%

MCNICHOLS 18-Dec-09 201.89 0.98 1.02 4.08%

CAPHOTEL 14-Aug-08 1,548.78 6.5 6.71 3.23%

SKYESHELT 26-Feb-08 20 105 100 -4.76%


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ETRANZACT 10-Jul-09 4,200.00 4.8 4.04 -15.83%

DANGCEM 26-Oct-10 17,040.50 135 108 -20.00%

NPFMCRFBK 1-Dec-10 2,286.64 1.5 1.07 -28.67%

RESORTSAL 23-Nov-09 13,175.73 0.95 0.5 -47.37%

BAGCO 9-Apr-08 6,215.00 4.09 1.94 -52.57%

GTASSURE 19-Nov-09 10,000.00 3 1.22 -59.33%

ABBEYBDS 21-Oct-08 4,200.00 3.89 1.44 -62.98%

PAINTCOM 2-Nov-10 792.91 3.9 1.44 -63.08%

IAINSURE 9-May-08 28,000.00 1.36 0.5 -63.24%

MULTITREX 1-Nov-10 3,722.49 3 1.1 -63.33%

MTECH 9-Jun-09 4,966.67 2.5 0.91 -63.60%

DANGFLOUR 4-Feb-08 5,000.00 15 4.9 -67.33%

GOLDINSURE 12-Feb-08 4,549.95 1.89 0.61 -67.72%

REGALINS 27-May-08 6,668.75 1.75 0.5 -71.43%

PORTPAINT 9-Jul-09 400 10 2.76 -72.40%

HMARKINS 22-Feb-08 6,000.00 1.94 0.5 -74.23%

UNIVINSURE 11-Feb-08 16,000.00 1.94 0.5 -74.23%

MULTIVERSE 8-Oct-08 4,261.94 2.15 0.5 -76.74%

HONYFLOUR 20-Oct-09 7,930.20 8.5 1.93 -77.29%

IHS 27-Jan-09 4,400.00 5.25 1.13 -78.48%

UNITYKAP 17-Dec-09 13,000.00 2.38 0.5 -78.99%

BECOPETRO 7-Oct-09 3,716.98 2.5 0.5 -80.00%

CHAMS 24-Sep-08 4,620.60 2.62 0.5 -80.92%

COURTVILLE 1-Apr-09 2,960.00 2.62 0.5 -80.92%

FTNCOCOA 23-Jul-08 2,200.00 2.85 0.5 -82.46%

AFROMEDIA 18-May-09 4,237.27 2.92 0.5 -82.88%

UNIONDAC 11-Sep-08 3,553.14 3 0.5 -83.33%

AFRINSURE 17-Sep-09 20,585.00 3.67 0.5 -86.38%

ASOSAVINGS 25-Apr-08 8,679.15 3.67 0.5 -86.38%

TANTALIZER 23-Jun-08 3,211.63 3.67 0.5 -86.38%

MTI 28-Nov-08 4,893.59 4 0.5 -87.50%

FIDSON 4-Jun-08 1,500.00 7.87 0.91 -88.44%

OMATEK 18-Jun-08 2,941.79 5.14 0.5 -90.27%

DAARCOMM 26-Sep-08 8,000.00 5.25 0.5 -90.48%

STARCOMMS 14-Jul-08 6,878.48 14.33 0.5 -96.51%

UHOMREIT 2-Jul-10 250.02 52.5 0.5 -99.05%

Source: Proshare Research/NSE

The Nigerian IPO market can simply be described as technically and realistically deadsince 2009 till date; as the market is yet to witness any traction since the meltdown of2008.


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The manufacturing company listed in Feb, 2012 by the new management at the NSE isyet to witness any price movement since it was listed.

This lack of no activity on the stock can be attributed to market confidence crisis drivingthe sentiments and low investors confidence which continues to permeate the market.(http://www.proshareng.com/news/16460)

The Exchange is about to witness it second listing in the year and also since downturn. Itoffers less hope for optimism. The necessary regulatory approval has been given by theauthorities for the listing of the financial firm.

Will there be a revival in the IPO market?No it will not. The confidence issue goes ahead of any analysis.

For instance, companies asking for astronomical prices are not going to find any takers.Especially when the global economic environment is so uncertain. But if companies withgood business fundamentals come out with issues at reasonable prices, there is no

reason why investors should not put their money in them.

Second, the high level of infractions that remains unresolved is an albatross.

The Exchange is however optimistic that IPOs are expected to become major aspect ofthe Exchange as from the end of this year 2012. In addition, it said new guidelinesevolved by it will begin to boost initial public offerings as evidence of return of investor

confidence in the market just as things were beginning to look up for the market andactivities would return to the primary market by the end of the year.(http://www.punchng.com/business/capital-market/nse-guidelines-to-boost-ipos-by-year-end/).

Closing ThoughtsThe once-hyped market for initial public offerings may not recover as swiftly as somefinancial players have been expecting. An unpredictable economy and the risk ofoverpriced deals scare investors away. IPOs have languished in the past two years as

prices sank for many names that went public.

While most markets have gradually continued to recover from the global financial crisisof 2008, IPOs remain out of favour. Just as well, IPOs can be a risky investment underthese conditions and the market has to confront the chicken or egg dilemma it hasfound itself.

Individual investors clamouring for an immediate return to a bubbling IPO market areequally cautious given the tough climate and the inability to predict what the stock willdo on its initial day of trading and in the near future since there is often little historicaldata with which to analyze the company.

For us in Nigeria, an opening may yet exist should we find the political will to advance agrowth inclusive economic model for the rebirth of the capital market by encouraging

through regulation backed incentives; the linkage between growth sectors of theeconomy, addition of privatised entities and new PPP structures with the capital market.

Indeed, we have a unique opportunity to create a bottom-up restructuring of our market

to eliminate hot money and a preponderance of speculators from our market andusher in a new era.

Time is however running out for a decisive action that will halt the drift.


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3.

55 Stocks Trading at N0.50 Kobo Today: What Next?4. Share Buy-Back: Is this an Option for the NCM Recovery? -5. Power to Minority Shareholders: High Time They Got Their Act Together.6. Can ICT Companies in Nigeria become Warren Buffet's babies...7. Status of Results from Quoted Companies iro their 2011 Audited Results8. SEC Division of Enforcement turns spotlight on private equity sponsors9. Can Training help the Nigerian Capital Markets? Interview with Delme Thompson

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Tags: IPOs, Frauds & Scandals, Private Placement, Regulatory Negligence, NSE, SEC,

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Will There Be a Revival in the IPO Markets Soon - 170612

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