Privileged class of investors

The two recent government-linked initial public offerings (IPO), namely the Global Logistic Properties (GLP) and Mapletree Industrial Trust (MIT), saw their trading debut of their shares/units on the Singapore Exchange. On Day One of trading, GLP closed up 10.7 per cent to $2.17 (from $1.96), whereas MIT closed up 24.7 per cent to $1.16 (from $0.93). The volumes traded on that day were 514 million shares and 345 million units respectively.

Global Logistic Properties allocated 91.3 per cent of the total issue as international placement, which includes institutional and other investors in Singapore. Only 8.7 per cent of the total or 102 million shares was for public offer.

Mapletree Industrial Trust allocated 82.2 per cent as international placement and 17.8 per cent for public offer or 106 million units.

Clearly, Day One trading volumes of both counters far exceed the public offer numbers. The placement shares/units were in the thick of the actions. These placement shares/units are often placed with rich investors with deep pockets and institutional investors. They are often placed in a privileged position to gain from these red-hot IPOs.

Imagine the staggering amounts of gains made on Day One:

GLP – Gain of $107 million
MIT – Gain of $79 million

These gains are the result of just being selected to invest in the shares/units and investors off-load them on the Singapore Exchange on the first day of trading. Included in these were also retail investors albeit a minor portion.

It is well known that the richer class has the privilege and they get the first bite of the cherry. The retail investors had to contend with applying the IPO and hoping that they were successful during the ballot.

Copyright © 2010, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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