Medilines shares tank in volatile stock market debut

MANILA, Philippines (Update 1, 3:48 p.m.) — Shares in Medilines Distributors Inc. crashed during its turbulent stock market debut on Tuesday amid renewed market volatility triggered by a new coronavirus variant.

From its offer price of P2.30 per share, the medical equipment distributor owned by Virgilio Villar, brother of tycoon Manuel Villar Jr., tanked 30% on its listing day, a massive drop that bucked 0.23% gains in the main index.

Considering that the company is in a critical industry that saw exponential growth during the pandemic, Medilines’ lackluster performance puzzled some analysts. In the first half of the year, the company reported a net income of P100 million, almost unchanged compared with a year ago.

Revenues during the period, meanwhile, grew 281% year-on-year to P815 million, which Medilines attributed to “increase in the demand for life-saving equipment amid the COVID-19 pandemic”.

For Luis Limlingan of Manila-based brokerage Regina Capital, it is “hard to say” what triggered Medilines’ fall.

“Maybe carry over from Omicron. We were trading at 7,400 prior to the variant scare, so it's probably adjusting with prices of other stocks,” Limlingan said in a Viber message when sought for comment.

“At this point it is anyone's guess,” he added.

READ: Local shares tank below 7k-level as Omicron, Fed hold attention

Separately, Aniceto Pangan, equity trader at Diversified Securities, believes Medilines' offer price might have been too expensive for investors despite having been discounted by 6.12%. The Omicron fears only exacerbated the slump, he explained.

"At IPO price of P 2.30 per share, valuation is quite high thus the correction," Pangan said in a text message. "The fall in MEDIC’s share prices may have more to do with persisting weakness in sentiment, as prices sold off steeply in the first hour of trading. Buying appetite in the market has recently been tepid and MEDIC was not spared from the same predicament."

Medilines’ initial public offering involved the sale of 550 million primary shares and 275 million secondary shares owned by Villar.

Gross proceeds from the primary shares offer is estimated at P1.27 billion, which will be used as working capital for procurement of existing products and build-up of the company’s medical consumables inventory. Parts of the cash raised during the IPO will also go to repayment of old debts.

Meanwhile, money generated from the sale of secondary shares — estimated at P632.5 million — will all go to Villar and will not benefit Medilines. — Ian Nicolas Cigaral with a report from Ramon Royandoyan

Editor's note: Updated Medilines and PSEi's closing figures.