Raslag plummets below IPO offer price
Raslag [ASLAG 1.89 7.80%] [link], the PSE’s latest solar power generation company, saw its stock price plummet almost 8% yesterday to P1.89/share, 5.5% below its IPO offer price of P2.00/share.
ASLAG briefly traded up about 5% in the first hour of trading before melting down on heavy volume to a low of P1.86/share.
The stock marginally recovered, and then traded sideways between P1.88 and P1.95/share before finishing the day at P1.89.
Trade volume was a lot lighter yesterday than on IPO day, with 105 million shares trading hands (as opposed to the 258 million that traded hands on Monday).
MB BOTTOM-LINE
Looks like my view that, in the world of solar-related IPOs, ASLAG would be more like Citicore Energy REIT [CREIT 2.51] than Solar Philippines NEC [SPNEC 1.65 5.10%] was accurate in that ASLAG is acting much “heavier” than SPNEC did, but I didn’t foresee the weight of the selling pressure to push through the IPO price into negative territory on the second day of trading.
I’ve heard from a few Barkadans asking where the Stabilization Agent, China Bank Securities (CBS), is in all this, but the reality is that a stabilization fund is only permitted to act on sales below the IPO offer price, and even then, it’s activity is not guaranteed to prevent the price from going lower.
The fund is meant to “prevent/minimize reduction in market price”, but the fund’s size (P105 million) and life-span (30 days) are limited.
The Stabilization Agent, the bank that operates the Stabilization Fund, is not compelled to exhaust the Stabilization Fund on any attempted sales below the IPO price until all of the fund is exhausted; it’s more of an art, and different banks acting as the Stabilization Agent might react to the same conditions in different ways.
Perhaps, like with what happened during AREIT’s [AREIT 39.95 0.38%] IPO, the selling pressure is just too strong, and the Stabilization Agent has determined (for now) to conserve its ammunition for a period when the funds can be used to snipe a thinner ladder of asking prices.
Theoretically, if CBS had deployed the Stabilization Fund as though it were a robot that operated under the simple command of “IF(current_price < IPO_price, BUY(lowest_ask))”, then CBS would have depleted the entire P105 million fund before lunch yesterday, and the stock would be completely exposed to the potentially harsh life of price discovery that can happen when an IPO stock slips below the offer price.
I know there are probably some ASLAG bagholders out there that wish CBS would have been more aggressive, and I feel your pain.
I felt the same way when AREIT slipped beneath the waves.
But it’s a good reminder that a Stabilization Fund is only a help, not a guarantee, and if the market turns against a stock with conviction there is very little any Stabilization Agent can do to prevent nature from running its course.
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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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