Business

Friday November 6, 2009

Grumblings about Maxis share offer, too few shares

Raison D'etre - By Risen Jayaselan


THAT Maxis Bhd’s listing structure has been grumbled about is not new.

Too few shares for the public seems to be the problem.

And judging from the considerable interest among retail investors to get a slice of Maxis, it is possible that unsuccessful applicants may continue to harbour the feeling that T. Ananda Krishnan and Saudi Telecom Co Ltd could have sold more Maxis shares to the public in this initial public offering (IPO).

The 90:10 split between institutions and the public (in terms of the Maxis share allocation) seems one-sided.

However, this needs to be seen in light of the size of Maxis’ offering.

The 213 million shares it is offering to the public will cost about RM1.1bil.

Will there be enough takers from the public if that amount was doubled or tripled?

This is moot, although one school of thought reckons that there is enough money in the system for the public to absorb many more Maxis shares.

A figure often quoted is that there is an estimated excess liquidity in Malaysia of some RM250bil.

Hence one wonders if Ananda and Co are missing out on an opportunity to have more public participation in their company as that, in turn, is likely to breed goodwill from the public, which helps in marketing the Maxis brand.

Consider the imminent listing of Grameenphone in Bangladesh.

Like Maxis, Grameenphone is the leading mobile operator in that country.

And like Maxis, Grameenphone will be that country’s largest ever listing.

It has got the Bangladeshi stock market excited and as an article in the Economist magazine put it, “Grameenphone will give almost 350,000 budding Bangladeshi capitalists something to invest in.”

But unlike Maxis, Grameenphone is looking to have an equal institutional and retail take-up of its new issue of shares.

It had done a pre-IPO placement of shares to institutions last December.

The institutions, ALL local, one might add, will end up owning close to 5% of Grameenphone, post-listing. So too will the Bangladeshi public.

To be sure, Grameenphone is a much smaller entity compared with Maxis.

It is raising slightly more than half a billion ringgit from its listing of new shares (which will make up 10% of the enlarged capital of the company), compared with Maxis, which is raising RM11.7bil from selling 30% of its stock.

Grameenphone shares are being offered at 70 Bangladesh taka a piece, which is about US$1 or RM3.40.

The minimum lot size is 200 shares.

Assuming that the average Bangladeshi investor – the IPO is only offered to citizens – is only wanting to invest RM680, then there could be potentially 350,000 Bangladeshis with shares in Grameenphone.

Unconfirmed reports say that more than one million Bangladeshis have applied for the shares.

In Maxis’ case, if we assume that the average retail investor is looking to get at least 1,000 IPO shares (which is the most common share lot size investors here use, even though lot sizes start from 100 shares), then there is the likelihood that there could only be about 213,000 successful applicants.

So even though Grameenphone is a smaller company, there could be more Bangladeshi citizens owning it, compared with Malaysians in Maxis.

To be fair, many more Malaysians will indirectly own Maxis through funds such as Employees Provident Fund Board (EPF), Kumpulan Wang Persaraan (KWAP) and Permodalan Nasional Bhd (PNB), which as anchor investors will be buying large chunks of the offering.

There is also a belief that the public issue of Maxis shares has been kept low as the issuer has to give a discount on the retail offering of about 5% from what institutions pay.

Going by this, Ananda and Co are “losing” out RM55mil for their 213 million Maxis shares being sold to the public.

Hence on the face of it, this theory makes sense.

Indeed, Grameenphone’s IPO was also priced at a 5% discount to the price it placed the shares out to insitutions.

But there’s one problem with this.

It is NOT a rule or regulation that a 5% discount has to be provided to the public in an IPO.

It is merely an industry practice, that’s premised on the theory that institutions should pay a premium as they are buying large blocks of shares.

There is nothing stopping Ananda and Co from issuing shares to the public at the same price that institutions pay and thereby not losing out from making a larger issue of shares to the average Joe.

Still, it is rather late to question Maxis’ listing structure, considering that its public offer just closed yesterday.

Besides, it is a free market and as long as all rules are adhered to, issuers can decide what suits them best.

Still it does seem like Bangladeshi retail investors are getting a good deal with Grameenphone’s listing in terms of share allocations.

Not forgetting that Grameenphone is still a growth story and is majority-owned and managed by Telenor, the same guys who have built DiGi.Com to what it is today.

But that’s not to take anything away from market leader Maxis, which has a track record of rewarding investors handsomely.

Perhaps that is why its “small” public allocation will remain a thorny issue for some time to come.

  • Deputy news editor Risen Jayaseelan does not in any way pretend that he knows much about investment banking and acknowledges that there could be a myriad of justifiable reasons why Maxis’ listing structure is the way it is. He’s just finding it hard to know what they are.

    Note: All estimates are based on the indicative IPO price of RM5.20 per Maxis share.


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