Citicore Renewable Energy files for P12.9-B IPO

Citicore Renewable Energy Corporation (CREC) [link] filed with the SEC to conduct a P12.9 billion IPO in March 2024. CREC plans to sell a primary offer of 2.9 billion shares for up to P3.88/share, plus a secondary overallotment option of up to 435 million shares. The prospectus filed said that CREC plans to use 85% of the proceeds on capex for the expansion of CREC’s solar power plant portfolio over the next two years. CREC is owned by Edgar Saavedra, is a sister company to Mr. Saavedra’s Megawide [MWIDE 3.06, up 1.0%; 63% avgVol], and is the parent company to Citicore Energy REIT [CREIT 2.56, down 0.4%; 139% avgVol]. 

> Primary heavy offer:  Only 13% of the shares up for sale are secondary shares (the overallotment option), meaning that 87% of the money raised (assuming the full sale of all the overallotment option) will go directly to CREC. Money raised through the sale of primary shares goes to the company conducting the IPO (CREC), but money raised through the sale of secondary shares goes to Citicore Power Inc (the selling shareholder). 

> Large post-IPO float:  Assuming the full sale of the overallotment option, the public will own 33.2% of CREC’s outstanding shares upon the completion of the IPO. The minimum public float for a company of CREC’s size is 20%, so this gives CREC a nice cushion. Plus, the higher the public float, the better the governance and transparency of the operating company. 

> Stabilization fund?  Yes! When you see “overallotment option”, that means stabilization fund. Though, ever since the PSE fully processed the Medilines Distributors [MEDIC 0.33, up 1.5%; 18% avgVol] debacle there’s been an unwritten rule that IPOs must come to market with a stabilization fund. 

> Who’s on the deal?  CREC selected UBS AG as the sole global coordinator and joint bookrunner, with BDO Capital [BDO 126.90, down 2.3%; 169% avgVol] as joint bookrunner and domestic manager. 

> What’s next?  The SEC must approve or deny the filing. If the SEC approves the filing, it then goes to the PSE for approval. There are no consistent timelines for either of these approval processes. Once all that is done, CREC (through UBS AG and BDO Capital) will test the market to set the IPO’s final price, then conduct the offer period to actually sell the shares to institutional investors and traders. 

> Dates still tentative:  CREC is aiming for a March 15 IPO, but that’s just a tentative date. CREC will not receive its final pricing, offer period, and listing date until the SEC and PSE approve the company’s IPO application.

MB BOTTOM-LINE: This is a huge IPO for the market, both in terms of its size (P13 billion is pretty big) but also in terms of its timing. The PSE has been bone-dry from an IPO perspective. The last one was in July (REDC), and there were only three total IPOs in 2023. The market itself has been about as “blah” as it can get, with the PSEi sitting around the same level as it was a year ago with whatever traders are left operating in a liquidity desert. All that being said, who knows what the market is going to look like in February/March when this transaction is scheduled to go. Will the monthly inflation prints continue to embolden the central banks to talk about rate cuts? The placeholder maximum price needs to account for the chance that the markets could take off with a 2024 pump, but not be so high that any reduction on the Pricing Date won’t give desperate firesale vibes should the market remain largely like it is today. I’ll be watching this one very closely.

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