VRG's IPO severely suffers from investors’ indifference

By Trung Ngoc - Feb 01, 2018 | 05:08 PM GMT+7

TheLEADERAlthough the registration for IPO of the Vietnam Rubber Group (VRG) has expired, only 100,772,400 shares, equaling 21 per cent of the total shares on offer, were registered for acquisition, according to Ho Chi Minh City Stock Exchange (HOSE).

VRG's IPO severely suffers from investors’ indifference
Investors are indifferent to VRG's IPO

A total of 499 investors registered to purchase these shares, including 454 domestic private investors, nine foreign individual investors, 12 domestic organizations and 24 foreign organizations.

Investors registered to acquire nearly 101 million shares, equivalent to 21 per cent of 475,123,761 shares offered through IPO which is scheduled to take place on February 02.

At the starting price of VND13,000 (US$0.57) per share, the maximum amount the State can collect is estimated at over VND1.3 trillion (US$57.9 million), much lower than the initially estimated amount of VND6.2 trillion (US$273.4 million). Therefore, VRG’s IPO can be considered failure despite VRG’s huge potential such as big land fund or the prospect of improving margins.

According to the approved plan, VRG's charter capital after equitization is expected to be VND40 trillion (US$1.76 billion), equivalent to four billion shares of which the State holds three billion shares, accounting for 75 per cent of charter capital. The Ministry of Agriculture and Rural Development (MARD) will represent the State to hold the entire State’s stakes in VRG.

Each block of 475,123,761 shares, accounting for an 11.88 per cent stake will be offered via IPO and to VRG’s strategic shareholders, respectively. 48,921,710 preferred shares will be sold to VRG’s employees, accounting for 1.22 per cent of charter capital. 830,769 shares will be sold to the group’s trade union, accounting for 0.02 per cent of charter capital. At the starting price of VND13,000 (US$0.57) per share, VRG is currently valued at VND52 trillion (US$2.29 billion).

In addition to IPO, VRG also plans to sell its shares to strategic shareholders under strict conditions. Specifically, strategic shareholders that are allowed to purchase these shares are domestic enterprises only, have had minimum charter capital of VND1 trillion (US$44.1 million) in five recent years and have been profitable for three consecutive years. Moreover, they have to undertake not to transfer these shares for five years.

VRG is considered a state-owned enterprise with strong assets and great growth potential. However, the thing that foreign strategic investors are restricted to purchase shares affects the attractiveness of VRG.