prices hold up in the Copyright Euromoney Publications PLC Apr 1995
SECURING a listing on an overseas stock exchange has become Indonesia's latest corporate craze.
A spate of state-owned and private companies are planning foreign equity offerings in the next few months, at a time when the domestic primary market has ground to a halt.
But already bankers and brokers are starting to wonder if the rush to list abroad indicates a new and viable avenue of fund-raising for Indonesian companies--or whether it will turn out merely to be a passing fad.
The fate of the two most recent--and high-profile--international initial public offerings (IPOs)--would seem to point to the latter.
Two weeks ago international investors were offered two remarkably similar transactions for two newly established holding companies of Indonesian pulp and paper interests.
The Sinar Mas group listed its pulp and paper division, which includes companies in Indonesia, China and India, under the name Asia Pulp and Paper (APP), in a transaction run by Morgan Stanley.
Almost simultaneously, two companies of the Raja Garuda Mas group--Jakarta-listed Indorayon and Riau Andalan Pulp and Paper--were reorganised and floated in New York under a new holding company, Asia Pacific Resources International Holdings Ltd (APRIL).
Both APP and APRIL are domiciled in Singapore and were listed on the New York Stock Exchange without a local or Asian listing.
Despite the lack of confidence among many US investors in emerging markets--and in IPOs generally--both issues were at least completed in full.
But the prices of both transactions need to be reduced to levels well below their indicated ranges to persuade investors to take up the shares.
Following roadshow campaigns in which the two companies virtually chased each other around the globe, the two IPOs were priced on successive days.
Salomon came first with its APRIL offering, with the lead manager being forced to cut the price on the 20m share issue to $7.50 per share.
The final price was 37% below the mid-price of the indicated range of $11-$13 that APRIL and Salomon had specified at the outset.
Morgan Stanley fared little better, pricing its 27m ADS (American Depositary Share) offering for APP one day later at $11.50 per share, compared with an indicated range of $13-$16.
In the event, placement of both issues was heavily skewed towards the US, with US demand accounting for over 90% of the APRIL offer.
By contrast, European and Asian investors took up just 2% of the APRIL offering--perhaps indicating that a New York listing gave them no more comfort in the stock than a local listing might have done.
With final proceeds of $150m, APRIL received $80m less from the IPO than it had originally hoped, while APP's flotation raised $310m against an initial target of $390m.
To some extent, the disappointing final price of both IPOs was due to the fact that two such similar offerings were competing for investors' attention at the same time.
In addition, the adverse climate for IPOs has spread far beyond Asia, with several recent European and US stock offerings also being reduced in size and price--or pulled altogether--in the face of poor investor sentiment.
But the experiences of APP and APRIL could have wider repercussions for other Indonesian companies hoping to tap overseas investors for funds, especially if sentiment towards emerging market stocks does not improve.
The two flot
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