Ananda Development (ANAN), the largest initial public offering issuer this year, is blaming the fact that its share price is trading lower than its IPO on miscommunication with retail investors.
Chanond: ‘It’s my own fault’
On its first day of trading last Friday, Ananda shares opened at 4.14 baht or 1.43% less than the IPO price of 4.20 baht and closed at 3.80 baht or 9.52% less than the IPO price in heavy trade worth 2.21 billion baht.
The large size of the share float made it the top trading volume of the day.
The company wrongly perceived its IPO would be successful after the warm response from institutional investors, which accounted for 75% of its 1.33 billion IPO shares.
"This has been quite an experience, a nightmare actually, but it's my own fault. I neglected communicating with retail investors, which resulted in the spread of rumours," chief executive Chanond Ruangkritya told the Bangkok Post.
He said book building had enjoyed strong demand, with foreign investors oversubscribing by three times, local institutions by two times and retail investors by six times.
This caused him to think mistakenly that everything would go as planned, he said.
But Mr Chanond said a close inspection after Ananda's share price turned into the only failure among IPOs this year showed him he had mistakenly believed retail investors understood what a leveraged buyout (LBO) meant to the company's share price.
"If they understood LBOs, then they would also get the point about why the company has a retained loss and allow us keep dividends for use as internal funding for future growth," he said, adding that the hard lesson learned is that local retail investors are not familiar with LBOs.
This caused them to question the company's performance, resulting in rumours flying online.
Mr Chanond said Ananda plans to use 3 billion baht or 55.9% of the total net funding of 5.37 billion to repay its loan to Krung Thai Bank.
The company had borrowed that amount buy its partner's 50% stake in its Ananda Development Two subsidiary.
The subsidiary has projects under development from which it expects to realise revenue of 2.3 billion baht in next year's first quarter.
Another 1.7 billion baht worth of units will be ready for sale in the first half.
"We should educate retail investors that once we repay the debt, we can sell the collateral units, which will return more revenue," said Mr Chanond.
He said the remaining IPO proceeds of 2.37 billion baht or 44.1% will go towards developing six new projects and the company's land bank.
Revenue from new projects launched next year will be realised in 2014-2015.
The company will realise revenue of 12.2 billion baht next year, which will allow it to achieve its target of 25% growth in net profit.
Shares of ANAN closed yesterday on the Stock Exchange of Thailand at 3.72 baht, unchanged, in trade worth 131 million baht.
About the author
- Writer: Darana Chudasri
Position: Business Reporter