New rules curb private placements

New rules curb private placements

Lock-up period deters short-run investment

Stringent regulations on private placement (PP) and bearish market sentiment have dried up the new supply of shares sold to specific investors at large discounts.

Since the Stock Exchange of Thailand (SET) imposed a one-year lock-up period for new shares issued via PP in early May, the number of companies offering PP shares discounted by more than 10% below average market price has declined to only three from 29 in the first four months of this year.

The three were Vintage Engineering (VTE), JMT Network Services (JMT) and Bangpakong Terminal (BTC)

VTE placed 85.64 million shares privately to Planet Energy Holdings at 3.50 baht each and another 189.82 million shares to 13 individuals at a price of 2.72 baht.

JMT sold 45 million shares to nine specific investors including skytrain operator BTS Group Holdings at 14.20 baht each.

BTC sold 4.38 billion shares to specific investors at a price of 0.08 baht each.

"PP share buyers with the exception of medium-to-long-term investors don't want their money to be locked for a year even if they have rights to buy shares at a cheap price," said an SET source.

Fluctuations in the stock market are also whittling down investors' appetite for PP shares, the source said.

A flurry of small-cap stocks last year offered PP shares at discounted prices for deep-pocketed investors.

Such offerings typically trigger a buying spree by retail investors after the plan is announced, while PP buyers unload shares shortly after they are allowed to trade to reap a windfall from the run-up in share price.

Some individuals who bought PP shares were found to have links to major shareholders of the issuers.

In 2014, 18 of the 34 PP share issuers sold shares at discounted prices.

In the first four months of this year, 18 of the 29 companies that offered shares to specific investors sold them at a discount of more than 10% from market prices.

Given concerns that small investors would be at a disadvantage from PP offerings, the SET decided to apply a one-year silent period on capital-raising securities placed privately and sold at a discount of more than 10%.

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