Monday, June 13, 2011

The Blame Game For The Disgraced XOX IPO

I just saw  the following Business Times article: Overstretched valuations to blame

  • Overstretched valuations to blame

    By Francis Fernandez Published: 2011/06/13

    KUALA LUMPUR: New listings on Bursa Malaysia are failing to gain premium in the market because their valuations are overstretched in the first place, merchant bankers who spoke on condition of anonimity said yesterday.

    Recent IPOs such as XOX Bhd, UOA Development Bhd, MCLean Technologies Bhd and Ideal Jacobs (Malaysia) Corp Bhd struggled to gain premiums on their debut or struggled to maintain their momentum.

    "For most of the initial public offers (IPOs) coming out in the market now, the valuations were done at least three or four months ago, when the appetite for risk was much greater," said a merchant banker who has worked directly on a couple of IPOs earlier in the year.

    He added that the trend of new listings not doing well on their debut are not confined to Malaysia alone, as even some of the IPOs in Hong Kong and Singapore have fallen flat in recent weeks.

    "You look at the Samsonite IPO in Hong Kong, it has jolted the valuations ... not only of the company, but also of its rivals. The ripples are everywhere as the June swoon sweeps the market," said another merchant banker........................

So overstretched valuations are to blame? Such a kind set of words to use. Some would rather prefer a much cruder and perhaps in the case of XOX,  'Bullshit Valuations Caused Stock To Crash!' Could anyone blame such harsh set of words?

More so since hXOX had plunged 35% on listing day. ( Stock is currently down another 8.75%  or 4.5 sen at 0.475! Remember the stock was IPOed to the investing public at 0.80 sen! WTH??? )

So why are these merchant bankers speaking on the condition of anomity?

Isn't this such a grave and serious situation here?

Wouldn't it be much nicer and transparent if we, the reader of the news, know who and who is talking what?

Anyway, who are the ones packaging and advising these **** IPOs? Aren't the merchant bankers and investment bankers the advisors of the IPOs?

And now these unknown merhcant bankers are blaming overstretched valuations?

I wonder who is blaming who now?

And so how badly overstretched are these valuations?

Take the XOX case. Company business model was questionable. It had literally no asset (NTA is valued at 11 sen per share!) since it was a leeching business model, piggy backing on Celcom's Axiata. It  was CLEARLY not making any profit and losing much money! But yet the IPO was priced at 80 sen?

How can?

Why? Was it based on the fact that the company states it would produce an incredible profit turnaround of 19.8 million this fiscal year? Yeah, wasn't it stretched way beyond belief?


Well for the case of XOX, AmInvestment bank was the advisor, sponsor, managing underwriter and sole placement agent and SJ Securities is the co-underwriter.

Now I wonder if AmInvestment understand and realise how badly stretched the valuation is for XOX?

Did XOX gave those overly optimistic earnings projections themselves?

Or were they advised by their bankers?

How?

How did THESE OVERSTRETCHED VALUATIONS arrived?

And then I cannot believe the next sentence.
  • "For most of the initial public offers (IPOs) coming out in the market now, the valuations were done at least three or four months ago, when the appetite for risk was much greater," said a merchant banker who has worked directly on a couple of IPOs earlier in the year.

Wah! Can talk like this meh? Does it mean that because the APPETITE for risk is greater that the IPOs are priced with much stretched valuations?

Wah! I hope my understanding is not wrong here.

And the last highlighted sentence...
  • He added that the trend of new listings not doing well on their debut are not confined to Malaysia alone, as even some of the IPOs in Hong Kong and Singapore have fallen flat in recent weeks.
Err... I seriously do no like such comments. Comeon. Just because it happened in other countries is not an EXCUSE!

Seriously!

Comeon!

Just because other countries IPOs collapsed and kaput-ed, does this give our IPO the same bloody excuse to crash and plunge like XOX!

Can we have seriously better mentality here?

Sigh.

4 comments:

Big Sea said...

SC is at fault for allowing this stock to be listed (and at this inflated price).

Analyst and investment are at fault to cooperate with the owner to list the stock and painting those beautiful projection.

Investors are at fault for not reading the prospectus thoroughly and investing in a business that they don't really understand.

Short term it seems like only investors are punished. Long term everyone will be losers. Only the owner will be laughing all the way to the bank.

I am curious to see when this stock will be in PN 17!

I hope one day all Malaysian will reject the ACE market. Most of the stocks there are laughing-stock.

limko said...

When the IB said "when the appetite for risk was much greater,",

I think he meant there are more suckers out there and you better make a killing while you can.

peng01 said...

http://2.bp.blogspot.com/-mepyCQQROvY/TfR-uMOv4gI/AAAAAAAAAKA/dLHSvISwwHU/s1600/IMG_0297.jpg

Fron the picture, we know that XOX major share holder were very happy for the first day debut :D

Moolah said...

Big Sea: Good points!

Limko: :P

peng01: Thanks and I've highlighted your posting. :D