The LFM Properties [LPC 0.107] [link] IPO will happen this morning, after LPC shares were transferred to Liberty Flour Mills [LFM 18.00] shareholders overnight. The LPC shares will list at an initial price of P0.107 per share, as determined by a valuation and fairness opinion by R.G. Manabat & Company. Over 24.8 billion shares will be listed, with 18.9 billion owned by LFM and subject to a one-year mandatory lock-up period, and 5.9 billion shares owned by LFM shareholders.
When was the offer period? There wasn’t one! This IPO method distributes shares to its initial set of IPO “buyers” through a stock dividend. There was no traditional offer period, where IPO buyers purchased stock from their broker after carefully reading the prospectus. The only way to have received LPC shares was to own LFM stock as of the date of record for the dividend, which was December 18, 2020. That’s nearly two years ago!
How did they set the price? Through a valuation report delivered by an accounting firm. A traditional IPO might stumble towards something that could be considered a market price for the IPO through discussions with potential institutional investors. Lots of pitch deck meetings and phone calls, trying to figure out the highest number that would sell all the shares on offer. Lots of moving parts. In this method, there is no squishy pricing phase. It’s done by way of a business valuation, but that process did not include a high-stakes game of telephone tag with investors to taste the public’s appetite for the shares.
Has this happened before? Yes, the last time was in June of 2020, when Altus Property Ventures [APVI 11.70 9.02%], a subsidiary of Robinsons Land [RLC 15.16 0.79%], was listed by way of introduction. I covered the listing extensively, because it was absolutely bonkers. APVI owns one wing of one mall, and earns all of its income from just renting that mall out. There were slight rumors that the Gokongwei Family would use APVI as a new property development vehicle, or perhaps could convert it into a REIT, but this was during the COVID lockdown when malls weren’t even open, so those revenue streams were dubious to say the least. You can read my blow-by-blow of how APVI’s first trading day went here. It was unhinged. At one point in the day, APVI was up 2,276% from its listing price. By the end of the day, it had fallen 92% from that earlier high, but still managed to finish up 83% from its listing price. Totally normal stuff.
How could the price change that much in one day? This is the one situation where the PSE won’t apply its usual price ceiling and floor thresholds. Normally, no stock can increase more than 50% of its previous day’s price, or fall more than 30%. But with an IPO by way of introduction, the PSE is all like bUt tHeRe wAs nO pReViOuS pRiCe, and just lets the open market do whatever it wants for the day. That valuation and fairness opinion just sitting silent in the drawer, being all like: “Am I a joke to you?”
MB BOTTOM-LINE
This type of IPO is like a strange house rule that your family has, which seems totally normal to you and your siblings only because you haven’t spent much time living in other people’s homes, because, well, why would you?
Then, you get older, and you invite some friends to come to the house for lunch or something, and then all of a sudden your friends are all up in your face like “why do you drink syrup out of a cup with lunch?”, and now you’re flustered.
Doesn’t everyone do that? Like, it’s not like we have it every meal.
We don’t have syrup with breakfast, or dinner. Just lunch. And only on Saturdays.
Why do we do that? I mean, we’ve always done it. Lolo said something about “balanced body energy” once a long time ago.
Yeah, it makes us feel like crap and I dry heave a couple of times to get it down, but it’s just what we’ve always done. Then, next Saturday, as you reach for that full cup of syrup, you think to yourself: “this is a little weird.”
But, it’s what you’ve always done, so there must be a good reason for it. Glug, glug, glug. Tara, inom tayo!
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