IPOs should not be delayed any longer

Monday, May 12, 2008
Experts, once again, have urged big corporations, which intend to make IPO, to go ahead with their IPO plans instead of delaying them because of the market’s falls.

eThe Ministry of Finance considers the IPO delays as a necessary solution to prevent the stock market from further falling. However, experts think that it is now the right time to reconsider the delays, as the delays have not helped prevent the VN Index from falling (it is now flirting with the 500 point threshold), while a lot of big corporations have missed their IPO appointments.

Nguyen Minh Phong of the Hanoi Institute for Socio-Economic Research and Development said that the delays of the IPOs of 20 big corporations and nearly 400 enterprises and banks since the end of 2007 have made the market uninspired with no new commodities, especially good commodities. The trading of the familiar share items has made the market less attractive in the eyes of investors, especially foreign investors, who aim to buy stakes of equitised corporations. If the situation cannot be improved, investors will leave the stock market for other investment channels.

“In the context of the current cold stock market, it is necessary to provide new commodities for the market to heat it up,” Phong said.

Dr Nguyen Thi Mui of the Finance Research Institute under the Ministry of Finance also does not think that delaying IPOs is a good solution as he believes it would slow down the equitisation process set by the government.

“State management agencies should keep a long-term vision on the stock market’s development,” Mui said.

Sharing the same view, Lawyer Vu Xuan Tien of VFAM consultancy firm said that civil authorities are claiming oversupply to delay the implementation of the equitisation task. “The delays would be indefinite if state management agencies and businesses thought that they had to wait until share prices soared to the 2006-2007 levels to make IPOs,” he said.

Meanwhile, Nguyen Son, Head of the Market Development Division under the State Securities Commission (SSC), said that SSC only recommends delaying IPOs, while enterprises should make decisions themselves on whether to make IPOs right now or wait longer.

When asked about the possibility of big names like Vietcombank, BIDV or Habeco listing on the bourse this year, Son said that the companies will list on the bourse, sooner or later, as the equitisation and IPO process has been approved by the government.

The problem now for them is to draw up suitable methods of asset appraisal and issuance. Son said that companies should not overvalue their assets and expect to sell all shares. The Ministry of Finance, learning lessons from Vietcombank’s IPO, is now drawing up a mechanism on offering stakes to strategic partners.

On the concerns about a possible ‘share dilution’, which could lead to share oversupply and make the market colder, Nguyen Danh Ky, Secretary General of the Association of Securities Business, said that suitable prices of shares will attract investors. Ky said that offering prices 10-15 times higher than face value proves to be unfeasible. However, prices 2-3 times higher than face value will successfully persuade investors to open their wallets. (DTCK)