MANILA, Philippines — There were no fireworks for the much-anticipated stock market debut of broadband services provider Converge ICT Solutions Inc.
Pampanga-based businessman Dennis Uy— different from the one in Davao— may have raised P29.1 billion from its initial public offering two weeks ago, the second biggest on record, but once listed stock prices tumbled at the get-go and closed 9.4% lower than its offer price to P15.22 each. Prices touched an intraday low of P14.92. The main index ended flat.
For Anna Corenne Agravio, equity analyst at Regina Capital brokerage, Converge’s IPO price might be too expensive for investors.
“Compared to Globe and PLDT, Converge is trading at a significantly higher P/E (price-to-earnings) multiple,” Agravio said in a Viber message. All else constant, a higher P/E ratio means the company’s stock is trading at a more expensive price relative to industry peers.
“This could have fueled today’s downturn,” Agravio added.
Speaking to ABS-CBN News Channel early on Monday, Uy justified the valuation of Converge, saying the company is in a “high-growth” industry when work-from-home arrangements are fueling demand for reliable internet service. “We are a unique company in the Philippines,” he said.
That said, Converge operations are so far limited to 730,000 homes in Luzon, with some proceeds from the IPO allocated to expand services to cover the entire archipelago. By 2025, Uy said Converge would have had covered 55% to 60% of Filipino households.
“We are fully committed to building the largest fiber broadband network in the Philippines,” he said.
There was a lot of anticipation going into Converge’s fund-raising, foremost of which was being held at a tumultuous time at the Philippine Stock Exchange index (PSEi). While the stock market has recovered some ground from a dive during lockdowns, especially last week, PSEi remained down 16.9% from last trading day of 2019.
On Monday, PSEi continued its winning streak, rising slightly 0.11% to end trading at 6,491.19. The broader all-shares index, however, dipped 0.02%. Decliners slightly outnumbered advancers, 107 to 102.
To further demonstrate the risk of listing during hard times, Converge was only the third firm to go public this year. In June, MerryMart Consumer Corp., a grocery operator, raised P1.6 billion through an IPO, while Ayala-led AREIT Inc., the first local real estate investment trust, got P13.6 billion last August.
But going forward, Agravio sees Converge’s aggressive expansion plans to pay off. Investors also appear to be largely betting for a recovery in the long run with values traded amounting to P3.69 billion, the most for any stock in the day.
“Nonetheless, long-term, Converge’s share price will be backed by improving fundamentals. Its network expansions will buoy growth within the next few years,” she said.
“A bounce-back is highly dependent on prevailing market conditions as well, so it could very well happen should investor sentiment continue to be bullish,” she added.