Danareksa blamed for unfair IPO
Danareksa blamed for unfair IPO
JAKARTA (JP): The initial public offering of the state-owned
PT Bank Dagang Negara (BNI) 1946 will be oversubscribed but the
lead underwriter may have acted unfairly, according to several
stock brokers.
"We have just experienced poor management of a state firm's
public offering. And it could have a negative impact on future
privatization programs," a senior manager of a joint-venture
brokerage house said.
"Many investors told us they were very unhappy with the
offering process, particularly with the poor distribution system
for forms. They were also doubtful they would get BNI's shares
through a fair pooling system," the manager added.
BNI has offered 1.08 billion shares, or 25 percent of its
enlarged capital, to the public through a four-day initial public
offering which ended last Thursday.
The BNI shares will be allotted on Nov. 15. Danareksa will
refund investors on Nov. 21 before listing BNI's shares on the
Jakarta and Surabaya stock exchanges on Nov. 26.
Fajar L. Sutandi of PT Sigma Batara told The Jakarta Post that
investors were uneasy about problems in getting subscription
forms.
"We failed to provide subscription forms to our clients who
have sent their money to our office," Fajar said.
"I have learnt that Danareksa printed only 800,000
subscription forms for BNI's 1.08 billion share offering," he
said.
The state-owned Danareksa Sekuritas is acting as the lead
underwriter for the offering which is believed to be the largest
issue ever made by a bank in Indonesia.
An investor told the Post he had canceled his order for
2,000,000 shares because his broker only had 5,000 shares.
Another dealer with a Hong Kong-based brokerage said the
underwriter had violated procedures by selling fixed-allotment
shares to individual investors.
"In this case, I think the market regulator should take firm
action," he said.
"I also learnt that a well-connected businessman subscribed to
up to 50 million shares of the fixed allotment category," he
said.
"Therefore, I doubt the offering will meet the objective of
the government's privatization program to democratize capital
through share ownership," he said.
Fajar said that of all the BNI shares offered, 49 percent were
allocated for foreign investors and 51 percent for domestic
investors.
About 50 percent of the shares allocated for domestic
investors were sold to institutional investors, including state-
owned pension funds and insurance companies, through fixed
allotments, meaning that investors will get the number of shares
that they subscribe to.
The other 50 percent of domestically-allocated shares were
sold via a pooling system. Under the system, in case of
oversubscription, investors will not get the number of shares
they subscribed to. Instead, the underwriters decide how to
provide a proportionate number of shares as a percentage of
investors' orders.
The brokers suggested that in future pooling systems should
use a draw procedure and not a proportional allotment procedure.
Seventy-nine securities firms are acting as underwriters and
sub-underwriters for BNI's initial public offering, while smaller
brokerages are acting as agents.
Danarkesa, the lead underwriter, is underwriting 386 million
shares of the shares, while three co-lead underwriters, PT BNI
Securities, PT Penthasena and PT Bahana Securities, are
underwriting 135 million shares each.
The 75 sub-underwriters were categorized into seven levels.
Danareksa has allocated the number of shares to be underwritten
by the sub-underwriters. The numbers range from 25 million shares
for a level-one sub-underwriter to 600,000 shares for a level-
seven.
The level-one sub-underwriters are Credit Lyonnais Capital
Indonesia, Merrill Lynch Indonesia, ING Baring, Jardine Fleming
Indonesia and Nomura Indonesia.
Despite the offering's sloppy management, the brokers were
confident the shares would perform well.
"In the gray market, the stock has increased from Rp 950 to Rp
1,000," Goh Poh Heng from Citramas Securities said.
Goh predicted there would be heavy selling in the secondary
market when the share price hits Rp 1,200.
He said that, unlike other state firms such as Telkom and
Indosat, BNI was in an industry in which investors had other
choices including cheap shares of large banks.
BNI's initial public offering, priced at Rp 850 a share, has a
price-earning ratio of eight, which is below the sector's average
of ten. (alo)