Medilines share price plunged on Tuesday’s debut

Medical equipment manufacturer Medilines Distributors Inc. ended as the biggest loser at the stock market on its inaugural trading day on Tuesday, as traders lamented the lack of mechanism to stabilize prices at the open market.

After listing on the Philippine Stock Exchange (PSE) under the ticker MEDIC, the company’s stock price slid by 30 percent to close at P1.61 per share from its initial public offering (IPO) price of P2.30 per share. The company is the first in the recent history of the stock market to hit the maximum daily price decline on its listing day.

The local stock barometer, on the other hand, ended marginally higher for the day.

This was even as demand for the Medilines’ IPO reached 2.5 times the base offer prior to the listing of shares. The company, led by Virgilio Villar, the younger brother of billionaire Manuel Villar, raised P1.9 billion from this offering.

“It’s overvalued and there’s no stabilization fund,” said veteran stock broker Joseph Roxas, president of Eagle Equities.

“This is a reminder that IPOs are not a guaranteed way to make some money in the market,” Roxas added.

About P692.79 million worth of Medilines’ shares changed hands on the stock market on its trading debut, making it the third most actively traded company. However, it also recorded the sharpest share price decline in the market for the day. Without a stabilization mechanism, its share price opened at P1.99 per share, went on a freefall and closed at its intraday low.

Stabilization fund refers to the budget set aside for underwriters to support the secondary market price of newly listed securities.

Despite its relatively expensive pricing, investors had swarmed the public offering of Medilines due to its market leadership alongside bright prospects for the health-care industry.

At the IPO price of P2.30 per share, investors are seen to pay close to 33 times probable earnings per share in 2022, much more expensive than the multiple of 22 times for regional peers.

“Medilines is the first company to be listed on the PSE that deals directly with the health-care industry. It is no wonder that Medilines’ IPO had an overwhelming reception,” PSE president Ramon Monzon said.

On the local small investors tranche, Monzon reported that 2,889 retail investors had participated from 64 provinces, 16 countries and one territory.

—Doris Dumlao-Abadilla