Earlier expectations of a sparkling year for initial public offerings (IPOs) have all but been dashed, with the present market maulings knocking the air out of new listings on the Singapore Exchange (SGX).
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With market sentiment becoming jittery recently, many of the 2010’s IPOs are now below their initial offer prices.
About half of the 13 Singapore IPOs closed below the offered prices during the first day of trading. In terms of trading performance since it started listing, 10 IPOs have fallen below the offer prices. Tiger Airways, TTJ Holdings and Cache Logistics Trust are the only three stocks still holding up.
Panic selling in the markets across the world on fears of a Greek default, the possibility of tightening measures by China to rein in the property bubble and contagion in Europe all sum up to a gloomy environment for new listings.
“The valuations from book-building are reasonable and realistic but there is no follow-through buying,” said Brendan Goh, DMG & Partners Securities’ head of corporate finance.
He added that the bulk of IPO investors are punters who do not have the long term stocks, leading to much volatility in share prices. There will be a spillover effect on subsequent IPOs, as the investors’ appetite for new listings is reduced.
Some issue managers expected some of the IPOs to be delayed due to increased volatility and poor market sentiment.
”Generally, the IPO market takes its cue from the secondary market. If the broader secondary market softens, investors are not likely to come in to support the primary issuances,” said Allen Cheong, Daiwa Securities SMBC Singapore’s head of equity capital markets.