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Stock Commentary

Citicore Energy REIT IPO delayed until maybe tomorrow, or maybe later

Merkado Barkada
Citicore Energy REIT IPO delayed until maybe tomorrow, or maybe later
We’re long overdue for a little of that enrichment to trickle down to the retail investor, in the form of higher expectations on the part of the SEC, PSE, and its trading participants for how retail money is handled and retail investors are treated.
Merkado Barkada

News broke yesterday around 2pm that the Citicore Energy REIT [CREIT 2.55 pre-IPO] IPO would be delayed by one day, as the “overwhelming demand” caused a backlog in the behind-the-scenes processing that required a little additional time to get sorted out.

The notice of the change was withdrawn just five hours later, with CREIT saying that the IPO date change was still pending with the PSE.

Then, around 9 pm, a disclosure was posted to say that the IPO would be moved to “no later than February 22, 2022”.

Definitely, the IPO is not today. That’s about all we know with certainty.

Maybe it will be tomorrow? Well, definitely, for sure, at least we know that it would have to be by Tuesday, at the latest.

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This sort of thing has happened before; most recently with Megaworld REIT [MREIT 20.15 1.26%], but probably most famously with Injap Sia’s MerryMart [MM 2.13 2.40%] IPO, deep in the “heart” of the 2020 COVID lockdown.

In both cases, the IPO was oversubscribed (MREIT by 2x, MM by 15x), and that’s roughly the same case here, with the latest rumor being that the CREIT IPO was 2x oversubscribed (in totality, across all tranches).

This “problem” (and for CREIT, MREIT, and MM, this was a good problem to have) seems to arise when there is significant retail interest in an IPO from a large number of accounts.

Here, CREIT said that there were nearly 20,000 investors (“double that of recent transactions”), and the lodgement of shares with the Philippine Depository and Trust Corporation (PDTC) is yet again the bottleneck that has inserted itself into drama of the moment, exactly in the way that a piece of boring infrastructure shouldn’t.

This delay isn’t the fault of CREIT, the same as how the previous delays were not the fault of MREIT or MM, yet just knowing that feels vaguely unsatisfying.

This is clearly a problem that needs to be fixed, but I don’t know enough about the situation or the interplay of jurisdictions and mandates to know exactly where to lay the blame for this very foreseeable situation.

So, we have a groundswell of retail interest in IPOs that is part of a larger trend of increased retail interest in the stock market generally.

The uptick in interest and activity has stretched the system’s infrastructure (PSE EASy refunds, PDTC lodgements), humbled broker infrastructure (COL Financial [COL 4.05 0.25%] server meltdowns over the past couple years), and yet it has also generally enriched both the PSE and the brokers through all the new money these accounts bring into the system, and all the commissions and fees that everyone has been able to earn off the trading activity, and the listing activity that has grown as a result of that trading activity.

We’re long overdue for a little of that enrichment to trickle down to the retail investor, in the form of higher expectations on the part of the SEC, PSE, and its trading participants for how retail money is handled and retail investors are treated.

I hope the PSE’s interest in reducing the size of PSE EASy program’s total tranche (from 10% of each IPO down to just 5%) isn’t just a short-sighted attempt to solve this “lodgement problem” by limiting the supply of stock available to local small investors. 

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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.

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