Medilines Distributors Inc. (MEDIC) listed its shares on the Philippine Stock Exchange on Tuesday. The offering of 825,000,000 common shares came at a price of P2.30 as the company raised approximately P1.265 billion. The “Sole Issue Manager, Lead Underwriter and Sole Bookrunner” was PNB Capital.
The closing price on listing day was P1.61, the “floor” price, down 30 percent. Immediately there was great “weeping and gnashing of teeth” as buyers who apparently expected quick and bountiful profits suddenly were holding losing positions.
Equally immediately came more weeping from “stock market snowflakes” and their enablers. One stock market expert who is in the process of writing a book of trading strategies and risk management for beginners had this to say: “PSE should be taking care of its handful of retail investors to encourage market participation. These bad experiences will only serve to discourage.”
Now, I am gnashing my teeth—fake, of course, but fairly expensive—at that sort of “snowflake” dumb thinking.
By current “definition,” a “snowflake” is someone who “is especially sensitive and more specifically, wants to be regarded and treated as unique or special.”
Let’s examine this idea of taking care of or “protecting its handful of retail investors.” If you happen to look at the web site of another “speculative” investment, you will find this warning: “Players have the sole responsibility for checking the accuracy of the data printed on your ticket[s].” That is from the Philippine Charity Sweepstakes Office.
I wonder if the aforementioned expert ever read beyond the cover to any of the 193 PDF pages of the MEDIC prospectus, especially beginning at page 26 and through page 47, “Risk Factors”? Those 15,434 words (my column has 600 words) is part—only part—of the protection and “taking care” the PSE does for its retail investors.
If that is way too difficult, one major stock broker did an 18-page report on the MEDIC offering and wrote regarding the P2.30 offering price of 32x Price Earnings Ratio, “To justify this premium, Medilines would have to deliver above-average growth over the coming years.” I guess the book writer has not gotten to the point of explaining what a PER “double the median P/E (14.7x) of its comparable (companies)” might mean to the share price.
Note this, the average current return on the total 1,008 IPOs in 2021 on all US stock markets is a negative 2.14 percent. The worst non-Chinese owned performing company is VectivBio Holding AG, down 82.06 percent since its listing. The best is esports wagering company Esports Technologies at 300 percent higher.
For me, I do not like to see the bulk of IPO proceeds used for paying down debt. The company previously borrowed the money to improve its business. The enhancements should have paid the debt. Now perhaps they want new money to pay a debt that may have been used unprofitably.
If the funds are going to be used for expansion and marketing reach, I want to know that the existing locations are profitable. Or is the company just adding more unprofitable locations with IPO cash?
Last but not least, I treat every IPO as if it was a start-up company, meaning I want a “sexy” story. A corporation that suddenly has a few hundred million to a few billion pesos in new cash—“my” cash—should have some wonderful excitement just like a start-up.
An IPO investor should not expect to make money if he or she is too lazy to do some research or too lacking in knowledge to understand that information. Go watch “Shark Tank” and see how successful “IPO Investors” make money.
E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.