Ashford W. Meikle, Staff Reporter
CEO of Supreme Ventures (SVL) Brian George announcing SVL's IPO last month at its head office in New Kingston. Beside him is vice-president for research and investment at NCB Capital Markets, Karlene Bailey. - Ricardo Makyn/Staff Photographer
THE NUMBERS for the Supreme Ventures (SVL) initial public offering (IPO) are finally in and they are less than encouraging: The public took up less than 40 per cent of the shares.
In a press release issued on Friday, SVL said 45,761,300 shares "were subscribed for in the offer." With a value of just over $220 million, that represents just about 36.6 per cent of the offer.
This means that applicants will be fully allotted the shares for which they applied. At the same time, some analysts have expressed disappointment with the market's reaction to the IPO, given the success of the country's last three IPOs.
WRITING ON THE WALL
But, based on the anecdotal evidence, the writing was already on the wall, even as the IPO closed on January 27.
"We didn't see any increased activity. Anybody could have noticed that, even a regular person as they go around in the industry would have realised that the demand was not there," a broker told Sunday Business.
"It is sad for the market, very sad for the market, because right now the market needs encouragement and this is not encouraging, not in terms of the profile for the company, but in terms of what it means for subsequent IPOs," fretted a senior executive upon hearing the news of the lacklustre IPO.
"They kind of got the downside of what happened with Mayberry. When they did their private placement last July (when some $1.8 billion was raised) they were sold out within the first day. In fact, they were oversubscribed so even though the market was down, investors were still bullish about the prospects of the company then. However, that has changed significantly, so investors are way more cautious now," said a source intimate with the IPO.
And that caution is reflected in the miasmic performance of the Jamaica Stock Exchange (JSE).
Since the beginning of the year, the main JSE Market Index has shed some seven per cent of its value since the beginning of the year. In fact, the index closed Friday's trading day at 97,596.31 points, down from the 104,510.39 it started the year with. And, last year, the JSE declined by some eight per cent.
NOT UNIQUE
But Supreme Ventures' lacklustre IPO is not unique: The market has been punishing to companies who come to it for capital injection. For example, last October, Capital and Credit Merchant Bank raised only 80 per cent of the funds it sought for its rights issue. And JMMB Limited, which had similar plans, cancelled its rights issue around the same time.
Analysts say that companies which have announced plans to list this year may just have to shelve those plans.
"Those companies CVM TV, Lasco, First Global all of those efforts may now be stalled," said the senior manager. "Apart from looking at the general economic conditions, apart from looking at the strength of the stock market, one of the variables you look for in going public is the strength of previous IPOs and, given this scenario, for an upcoming IPO, it's not going to be encouraging," explained the senior executive.
But even though it came to a hostile equities market, SVL had no control over their IPO timing since the company was mandated by the Bettings, Gaming and Lotteries Commission to list on the Jamaica Stock Exchange no later than February this year. The company sought to raise about $600 million with an offer for sale of almost 125 million shares, or 4.73 per cent of the company's issued share capital when its IPO opened on January 12.
The fact that the IPO was 'undersubscribed' now means that the underwriter and lead broker, NCB Capital Markets (NCBCM) will have to shell out almost $380 million to take up the remaining 79 million stock units at the offer price of $4.81.
Ironically, in the past, NCBCM has defended the Supreme Ventures stock as one that is not a "quick buck" opportunity. Said managing director, Christopher Williams in a previous interview with this paper, "We want to discourage speculators from jumping in to ride the issue. This is not how you take advantage of this opportunity."
