The PSE has played host to 14 IPOs over the trailing 12 months (TTM), starting with Filinvest REIT [FILRT 6.78 0.44%] in August of 2021, and ending (so far) with Balai Ni Fruitas [BALAI 0.67 3.08%] a little over two weeks ago.
While each stock’s price changes every day, the overall trend has been decidedly negative.
One one stock is in positive territory (Solar Philippines NEC [SPNEC 1.56 1.89%]). The 14 IPOs took over P79 billion from public investors, and those shares are now worth just P73 billion. That’s an aggregate loss of nearly P6 billion (7.5%).
Driving that loss is the four IPOs that have lost more than 30% of their value: Medilines Distributors [MEDIC 0.63 1.61%], AllDay Marts [ALLDY 0.28], Haus Talk [HTI 0.87 3.33%], and Bank of Commerce [BNCOM 8.30 1.89%]. But it’s not like these companies are bad businesses; there are decent arguments that can be made on behalf of each one.
And it’s not like these were all bricks from the start; I mean, MEDIC was, but HTI, ALLDY, and BNCOM all had positive first days.
ALLDY even hit the ceiling on its first day.
The REITs all had pretty sustained success through the latter part of 2021 and the early part of 2022, before interest rate hikes started to tarnish their (comparative) luster. But what accounts for such a sad list of poor performances?
If we consider each stock to be a “family”, then the Leo Tolstoy quote comes to mind: “All happy families are alike, but every unhappy family is unhappy in its own way”.
MB BOTTOM-LINE
The market is down and uncertain. Inflation is high and rising. Interest rates are rising.
The pandemic still hampers a complete return to normal.
All of these factors, in one way or another, have revalued all of the companies on the PSE, and IPOs are no different.
Some IPOs appear to have been overvalued from the very start, while others were only revealed to be overvalued in the weeks and months that followed their IPO.
Yet others seemed to be properly valued (or even undervalued) when they were introduced, within the context of the time of their introduction, only to have later events hack and slash at their valuations.
These results should inform future IPO investors about the great uncertainty that comes with IPO investing; these are not automatic money-makers.
They’re not all slam dunks. Even with a stabilization fund, there’s a lot of risk to investing in these offerings.
That’s not to say that IPOs are bad, but it is to say that you need to use your discretion.
IPOs sell at the highest price the market will pay for the offer stock. It’s not the PSE’s job to make sure that the wider investing community agrees with this initial valuation.
It’s not the PSE’s job to carefully curate IPOs to make sure that investors avoid loss. It’s the PSE’s job to help companies access the public capital markets to raise money.
As investors, it’s our job to figure out what deserves our money and what doesn’t. That responsibility cannot be delegated.
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