LFM Properties IPO was absolute insanity
The Liberty Mills Flour [LFM 17.78 1.2%] spin-off, LFM Properties [LPC 0.205 91.6%], opened for trading yesterday morning with the first trades coming through at P0.398/share.
That’s already a 272% increase over the valuation and fairness opinion price that LPC received from KPMG of P0.107/share.
Six minutes later, by 9:36, the price had jumped up over 600% from that opinion price to P0.75/share with a little over half a million shares trading hands around this price.
At that price, LPC had a marketcap of P18.75 billion.
Keep in mind, LPC’s marketcap coming into the day was just P2.67 billion, and the marketcap of its parent company, LFM, which owns 58.6% of LPC, was just P2.7 billion. LPC was now (technically) worth 6.9 times its parent company.
Nice and normal. By 9:39, the price had dropped all the way back to P0.39/share, which is a 48% drop over three minutes, but still a 270% gain relative to that opinion price. By 9:54, the price was down to P0.30/share, which was down 60% from that early peak, but still up 180% on the day.
At 10:00, the price reached P0.20/share (up 87%).
It bounced back up to P0.25/share (+133%) just before lunch, but kind of faded through the day back down to P0.205 where it closed, down 73% from the 9:39 AM peak, but up 91.6% on the day.
MB BOTTOM-LINE
As predicted, this IPO was a joke, just like the last listing by way of introduction.
The PSE says that it removes the daily price increase and decrease thresholds in order to allow “market forces to determine the price of the securities.”
Those thresholds would have capped LPC’s potential gains on the day at 50%, just like every other stock, and even every other IPO.
What, exactly, did market forces “discover” about LPC’s price?
Well, all we know so far is that it’s probably not P0.75/share.
Sweet. What else did the market forces tell us, though?
For one thing, they told us that the regular price thresholds, while imperfect, actually perform a very useful function; the 50% gain cap prevents FOMO from infecting investors and discourages euphoric speculation and obvious price bubbles.
This is the kind of trading that I associate with shitcoins on dank crypto exchanges with no fixed address and website text that looks like it was written with a heavy reliance on Google Translate.
This is the kind of trading that reeks of bored equity traders just trying to have some fun on the side.
I think that there’s a time and place for that kind of fun, but why the PSE thinks that it’s a good idea to encourage price bubbles that leave hundreds or thousands of investors hopelessly underwater is beyond me.
Why not slap those caps on this kind of listing?
If it’s ok for “market forces” to determine the price of every other thing on the PSE within that -30% to +50% band, even other IPOs, then why couldn’t it work for this type of listing in the same way? The PSE: “Just drink your syrup.”
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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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