How can the stab fund agent be buying and selling at the same time?
I had a few Barkadans ask this question yesterday, in reference to the disclosure by Raslag [ASLAG 1.92 4.95%] that its Stabilization Fund Agent, China Bank Securities (CBS), bought just over 6 million shares of ASLAG on Tuesday when ASLAG’s price dropped significantly below its IPO offer price of P2.00/share.
Each question pointed out that, on that day, CBS was also credited with being the selling broker for over 40 million shares of ASLAG; how could CBS sell ASLAG shares harder than it purchased them, when CBS was supposedly the stabilization agent for the stock?
The answer is (probably) that those sales attributed to CBS are from CBS’s role as a broker to its clients.
When private clients of CBS, COL Financial, FMSec, or any of the other brokers execute a personal/private order, those orders are routed through the system and are attributed (as a buy or sell order) to the broker that facilitated the trade.
CBS wouldn’t be trading its “own book” (that is, making trades on ASLAG for itself) against ASLAG while under contract to perform stabilization agent duties for ASLAG’s offering; the sell trades attributed to CBS on that day would have been the personal/private trades of CBS clients, which CBS is obligated to execute.
MB BOTTOM-LINE
Stabilization funds have been a hot topic of conversation ever since Medilines Distributors [MEDIC 0.69] boldly dropped off into the abyss without one last year, but that conversation has not always been as useful as it could have been.
As many have pointed out, while the presence or absence of a stabilization fund is documented in the prospectus and filing disclosures, the “plain language” about what a stabilization fund actually is, what it can do, and what it cannot do, is not.
I think the rush to latch on to stab funds grows out of the PSE’s interest in attracting new investors to the market.
IPOs are one of the big casino-like events that get a lot of media traction, and stabilization funds make rug pull results like what happened with MEDIC less likely to harm the PSE’s image to new investors through negative word-of-mouth.
I realize that this rant is off-track, but the larger point that I’m trying to make is that, like a lot of things in life, the “how it actually works” is a lot more nuanced and difficult to understand completely than the high-level “how it seems to work” summary.
I’m going to dig much deeper into this next week, with a one-day special episode to explain as much as I know about stability funds, in plain language, that I can refer back to in the future.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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