For an IPO as hyped up as Wateen Telecom, oversubscription isn big news. The subscription of more than 200 million shares against the offered quantity of 110 million shares and the 90-million green-shoe option testify that marketing tactics employed by Wateens management worked successfully.
It just had to be; Wateens week long campaign included fancy presentations, corporate dinners and also individual presentations for influential investors.
And to top it all, the telecom firm sponsored the publication of a full-scale advertising supplement on IPO day, that incidentally also carried laudatory messages from none less than President Zardari and Prime Minister Gilani themselves.
Though, giving congratulatory messages isn a legally flawed move as such, it still makes one wonder since when the government actually started advocating private sector public offerings. Clearly, one can recall a precedent of this sort.
Perhaps, there were some important reasons - such as the fact that Wateen is the first telecom listing in four years or that the firm is backed by Sheikh Khalifa bin Zayed Al Nahyan - the ruler of Abu Dhabi - who by the way also supported the IPO through his message in the supplement, or perhaps that the transaction was advised and arranged by Arif Habib Limited, whose owners reportedly have close links to the Presidency.
Anyways, the bottom line is that Wateens IPO has been fully subscribed.
Soon the management will purchase the remaining 51 percent in Wateen Solutions (Pvt.) Limited at a price of about Rs494 million and retiring its own financial obligations worth Rs1.47 billion - both of which might just have been otherwise difficult to finance, because of the firms excessive leverage ratios and the banks reported avoidance to lend more.
But while Wateen may live happily ever after, investors might necessarily not.
A recent study by Topline Securities revealed that while the number of IPO and the response by investors has been improving, shareholder wealth has not. Though share prices of some are only marginally lower, others are currently trading at sharp discounts to their respective offer prices.
That could be because the overall market has been languishing for the last ten days or because the market lacks liquidity. A more plausible reason could be that its just a typical post-IPO sell-off observed time and again in recent years.
If thats the case, then Wateens stock, which is already trading lower than its offered price at the provisional counter, might fall even further once it makes it to the big board.
Again, if that happens, one could attribute it to poor market sentiments or to Wateens bloated debt-laden balance sheet and what Foundation Securities called
evenue stream volatility in its research note published earlier this month. The game of patience has begun.
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