Alternergy finishes flat after a quiet first day
Alternergy [ALTER 1.28 unch] [link] started its life on the PSE on the wrong-side of its ?1.28/share IPO offer price, with the first few trades of the day coming in at around ?1.22/share (-5%). While the price climbed consistently, it took nearly an hour, until 10:30 AM, for the organic demand (or the stabilization fund) to push ALTER back up to break-even. The price even pushed into gain territory, reaching ?1.30/share, but it do so on very light volume. The stock dipped back down below the offer price when trading started up again after lunch, but the price was stickier to the offer price from that point forward. ALTER ended the day at ?1.28/share, which is exactly what IPO buyers paid.
MB BOTTOM-LINE
That start in the red got a lot of people on forums asking questions like, “Where’s the stabilization fund?”
While ALTER had (and still has) a stabilization fund, just remember that stabilization funds are not a guarantee that an IPO won’t go below the offer price.
They are a potential source of artificial demand, but the stabilization agent -- the bank or brokerage charged with administering the stabilization fund -- gets to use its own discretion as to how that fund is deployed.
If the price is below offer, as it was for the first hour of ALTER’s life, the stabilization agent has the authorization to make purchases on the open market with the goal of manipulating the stock’s price upward, but it gets to choose when to engage and to what extent.
The stabilization fund has a limited lifespan (1 month max) and a finite amount of resources that it can use to achieve that goal, so there is a little bit of gamesmanship when it comes to how the agent will deploy the funding.
We won’t know if the stabilization fund was used yesterday until ALTER makes its first stabilization fund disclosure, but it’s something that I will continue to track so that I can give everyone a better idea of how the fund is doing and how long it might live.
--
Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
- Latest
