Exciting offering

With demand for tech stocks growing exponentially in the global markets, Xurpas Inc., one of the country’s largest independent mobile consumer content providers, successfully listed its shares in the Philippine Stock Exchange. 

Initially priced at P3.97 per share, demand for Xurpas’ stock drove its retail price up 49.9 percent to an intraday high of P5.95 a mere hour from the day’s opening bell. By mid-day, brokers were faced with a demand of 60 million more Xurpas shares, but there were no sellers in sight. Indeed a remarkable feat when you consider the shares of Phoenix Semiconductors Philippines Corp closed flat on its own stock market debut just last Monday, Dec. 1. 

Xurpas was founded by three young tech entrepreneurs – Nico Jose Nolledo, Raymond Gerard Racaza, and Fernando Jude Garcia. The company specializes in the creation and development of digital products and services for mobile phone end-users. 

Ricky Galang, president of SB Capital, the sole book-runner, issue manager and sole lead underwriter of this latest offering, described the demand as overwhelming with the issue oversubscribed by more than six times and allocations split 70/30 in favor of institutions. 

Among them are three large anchor investors whose combined orders amounted to more than 100 percent of the issue, but due to the relatively conservative issue size were allocated only roughly 25 percent of the offering. There were also four foreign investment funds, the largest of which purchased approximately five to six percent of the issue. 

Galang made sure, however, to emphasize that most of the credit belongs to Xurpas and the people behind the company. After all, they built a very sound company. One that was able to go straight to an IPO without previously tapping any external equity or debt. They evidently have a great business model, are very profitable, and their growth rate is spectacular. 

In its prospectus, Xurpas is described as a creator, developer and manager of proprietary platforms for mobile operators. The company also offers complete portfolio of products, including online casual games, messaging and other social discovery applications, as well as various forms of mobile commerce. It counts top telecommunications companies like Smart Communications and Globe Telecom as among its customers. 

Asked further about hurdling challenges like the company being an unknown and the relatively small issue size, Galang explained with a sheepish grin that it was the combination of an excellent business model with very healthy margins, robust growth in the right industry, right timing, an excellent management team, and of course, choice of underwriter. 

It is now without doubt that Xurpas hit all the right metrics that resound with investors, be they foreign or local, retail or institutional. Timing evidently played a great part. But Hidden Agenda believes the marketing strategy and the execution of SB Capital played a huge role as well.

We learned that there were a lot of things SB Capital did differently because of Xurpas’ relatively small offer size and initial lack of market and investor appreciation. For one, their marketing to institutional investors was relentless. They scheduled more one on ones and took them around Asia. They conducted conference calls with clients from Europe. Some even flew in to meet with them. We also learned that they reached out to a lot of partner institutions both domestic and global, ultimately generating substantial foreign orders without engaging foreign underwriters. 

Regarding the question as to how SB Capital earned the mandate to be the sole book-runner, issue manager and sole lead underwriter for the Xurpas IPO, Nico Nolledo, chairman and president of Xurpas, said only SB Capital saw their true potential. They showed excitement. And SB Capital ran with it. 

Nolledo was also quick to add that Xurpas has always been debt-free and never really experienced dealing with a financial or investment institution in the past.  But when he considers how SB Capital guided them through the entire process, he adds there was no question that they chose the right people to work with. 

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