Ayala Group worried that GCash IPO ‘too big for our market’

In an interview with InsiderPH, PSE [PSE 178.00, up 1.8%; 138% avgVol] CEO Ramon Monzon [link] discussed the possible IPO of GCash, which counts Globe [GLO 2204.00, up 1.9%; 55% avgVol] and Ayala Corp. [AC 612.00 unch; 56% avgVol] as significant shareholders. GCash is said to be seeking a valuation of approximately P465 billion, and at this valuation, GCash would need to sell at least P90 billion worth of stock at an IPO to comply with the PSE’s 20% minimum public float rule. According to Mr. Monzon, he’s been in talks with GCash and the Zobel Family “because one concern is this might be too big for our market.” He added, “They’re asking me if I’m prepared to reduce the required float of 20%. I said I’m not dogmatic about the 20%.” 

MB bottom-line:  The article provides a lot more context (such as the range of possible exemptions and some compelling pushback from the managing director of China Bank Capital) and is worth a read. This whole issue makes both the PSE and the Zobel Family seem weak. The PSE seems weak because its CEO is in the media talking openly about bending the rules that it just recently amended, just to make the listing more palatable. As the dissent in the article mentions, one of the objectives of the minimum float rule is to increase the number of non-owner shareholders to dilute the influence of the owners and make the listed company less beholden to the owners’ private interests. The Zobel Family seems weak because they’ve been teasing GCash for years, selling private round after private round to ratchet up the valuation, hyping this massive record-setting IPO, only to appear to be chickening out at the last minute, worried that the buyers might not show up. As the InsiderPH article mentions, the last IPO that sought an exemption was Citicore Renewable Energy [CREC], but CREC abandoned the exemption after it found an anchor investor willing to take on a bigger piece of the IPO pie. This history implies that GCash and the Zobel Family are not confident in their ability to sell stock at this valuation, since if the valuation were enticing, those investors would be flocking to the PSE to take advantage of the opportunity. In finance, price is everything. To borrow (and butcher) a line from a very very old movie (that I’ve never actually seen), “If you price it (right), they will come (and buy it).”

Merkado Barkada is a free daily newsletter on the PSE, investing and business in the Philippines. You can subscribe to the newsletter or follow on Twitter to receive the full daily updates.