Phoenix Semiconductor Philippines Corp. (PSPC) was listed Monday and today (Tuesday) is the listing day of Xurpas Inc. (X), the market’s recent public equity offerings.
Another equity issue actually followed these public offerings. This was the “follow on offering” of listed Integrated Micro-Electronics Inc. (IMI) last week.
Back in January 2010, IMI was listed through what is called “listing by way of introduction” (LBI)—a process of listing shares in the bourse by mere approval of its listing application.
Offering terminologies
LBI is one of two approved ways of listing a company’s stocks in the local exchange, the other being the so-called public equity offerings which most of us are now familiar with also as a way of raising capital fund.
In a public equity offering, the company that desires to list its stocks engages the services of a financial underwriter—a marketing agent, in a plain and simple term.
The underwriter conducts a book-building activity, the purpose of which is to build investors’ demand and, at the same time, determine the stock’s optimum market price.
The activity also includes all of the steps needed to get necessary clearances and approvals from relevant parties, most importantly with the Securities and Exchange Commission (SEC) and the Philippine Stock Exchange (PSE).
This process may take about three to six months to accomplish. And depending on the market’s auspiciousness, the offering period (which lasts for about a week) and the listing date are set. These activities are set about a week apart.
A public equity offering is further distinguished into a primary or secondary issue. Involved in the primary issue is the offering of shares taken directly from the unissued shares of the capital stock of the company. Being so, the proceeds from the sale of the stock offering will go to the company’s coffers to serve as additional funds to support permanent working capital requirements or capital expenditures for business expansion purposes.
A secondary issue is different. The stocks offered for sale are not from the company’s unissued shares but from existing stockholders. In other words, this involves the sale of shares previously issued by the company.
Because of that, the sales proceeds of the public offering will not go to the company’s kitty but into the pocket of the selling stockholders. A secondary issue is not, therefore, a capital-raising exercise for the company. It can be just a part of the company’s compliance to the bourse’s listing requirement and for the purposes of the individual selling stockholders.
In practice, a public equity offering may involve either a primary or secondary issue or a combination of both. This may also happen in the case of a follow-on offering, which is normally more of a financing exercise to directly fund company programs.
Further to listing by way of introduction, there are about five ways a company desiring to list its stocks can resort to.
Based on the PSE’s latest amended rules on the subject, which were approved in 2011, these are as follow:
The securities or shares for listing “are already listed or traded or will simultaneously be listed on another stock exchange or, subject to the approval of the exchange, are listed on another trading market”
The shares to be listed “are distributed by way of property dividend by a listed issuer to shareholders of that listed issuer”
“Where a holding company is formed and its securities are issued in exchange for the securities of one or more listed issuer or issuers is withdrawn at the same time the securities of the issuer are listed”
“Where listing of securities in an exchange is mandated by law or by the SEC, in the exercise of its powers under the Securities Regulation Code, and where public offering of securities is mandated by law or applicable regulations; provided that the applicant company secures a clearance from the relevant agency stating that such agency does not object to the listing by way of introduction of the securities of the company; provided further that a company which is considered as a ‘closely held corporation’ as such term is defined under Section 127 (B) of the National Internal Revenue Code of 1997, is NOT qualified to list by way of introduction under this subsection”
“A subsidiary company that is qualified to list under this subsection hereof cannot list its holding company which does not meet the requirements of this section”
Bottom line spin
IMI is the electronics manufacturing unit of Ayala Corp. established in 1980. It is one of the leading global providers of electronics manufacturing services (EMS) and power semiconductor assembly and tests services. It currently has factories in the Philippines, Mexico, Bulgaria, Germany, China, Japan and France.
The offer price was set at P7.50 per share, with the total size of the public offering consisted of 215 million shares with an oversubscription allocation of up to 85 million shares for a total of 300 million shares. The offering is hoped to raise up to P2.25 billion.
The proceeds from the offering will be used primarily for the “expansion of IMI’s operations, plant augmentation and increase in plant capacity.”
Incidentally, the follow-on offering is a precondition of the PSE in allowing IMI to list by way of introduction in 2010. IMI was already penalized for failing to hold the said offering since listing in 2010.
For the first half of the year, IMI posted a five-fold increase in net income to US$11.3 million from year-ago level. This was partly enhanced by the 23-percent rise in revenue to US$431 million.
With the robust sales of automotive electronics, increased demand in telecommunications infrastructures and storage device markets, IMI expects to maintain its profitable growth trajectory.
Unlike in the case of PSPC and X, however, there were no long lines for IMI from small investors during the offering period. If this is any indication of its market performance when the follow-on offering shares will be traded on Friday, Dec. 5, we’ll know by then. Last Friday, though, IMI’s last traded price was at P7.80 a piece.
(The writer is a licensed stockbroker of Eagle Equities, Inc.. You may reach the Market Rider at marketrider@inquirer.com.ph , densomera@msn.com or at www.kapitaltek.com)