VietNamNet Bridge – Selling shares at overly high prices at the initial public offering (IPO) may leave bad consequences for businesses and their employees. That was exactly the problem which occurred with Vietcombank. MobiFone, the leading telecom company in Vietnam does not want this to be repeated when it becomes equitized.

VnExpress has quoted a manager of MobiFone as saying, “that MobiFone equitization is an important part of the plan to restructure the enterprise. The equitization process has been prolonged for many years, and it should not last for any longer,” he said. However, he admitted that speeding up the equitization process is without the reach of MobiFone.

The high ranking executive said that the equitization in Vietnam in general and in MobiFone in particular, should target many other goals rather than bringing surplus money to the State budget.

“We once saw the enterprises which made IPOs at the “hot” moments of the stock market; therefore, they could sell stakes at high prices. However, the high IPO prices later brought bad consequences to them,” he said.

“Vietcombank is an example and I do not want to see this to be repeated with us,” he added.

In fact, MobiFone’s enterprise appraisal was completed right in 2008, but the enterprise still has not made IPO because of the gloomy stock market which cannot allow it to sell stakes at high prices. The lackluster stock market is also the main reason which has caused the worry that the MobiFone’s equitization will, once again, be delayed.

Vietcombank’s IPO share price was 107,800 dong per share on average, while its employees could purchase at the preferential price of 65,000 dong per share. However, after the IPO, Vietcombank share prices have been decreasing continuously. The bank’s share price has dropped to the level which is much lower than the preferential price applied to the bank’s staff.

According to VnExress, Vietcombank share is now trading at 28,300 dong per share, just equal to 50 percent of the preferential price.

The newspaper has quoted a high ranking executive of the bank as saying that “until now, both managers and staff of Vietcombank still feel the bitterness from the overly high IPO share prices.”

The bank’s executive said that the overly high IPO share price has made it difficult to find foreign strategic partners, because no foreign investor accepts to purchase stakes at such a high price. Meanwhile, Vietcombank’s employees, especially the ones who prepared to retire at the IPO time and felt happy with the stake purchase at preferential price, have become miserable because the share price has been decreasing.

“It would really be a tragedy for the employees, who had to borrow money from banks to purchase stakes at the preferential price,” he said.

The executive went on to say that if making IPO at the time when the market price is not high, enterprises would not get much money, but the IPO prices will truly reflect the real value of the shares, and everything will go more smoothly later. Vietinbank, for example, made a successful IPO, even though the average IPO price was not high.

When making IPO in 2008, Vietinbank could sell shares at 20,265 dong per share on average, which was just equal to 20 percent of that of Vietcombank. This allows the bank to easily find two big foreign strategic partners - Bank of Novascotia, a Canadian leading bank and International Finance Corporation (IFC).

Most importantly, Vietinbank’s workers can enjoy benefits from the share price increases. They could purchase shares at the preferential price of 12,000 dong per share, while the bank’s share price has increased to 28,300 dong per share, the same level as Vietcombank’s share price.

Le Duc Tho, Deputy General Director of Vietinbank, also thinks that Vietinbank has succeeded with its equitization. He admitted that it was really difficult to make IPO at the time when the market was gloomy, but the bank has changed so much after the equitization. “We would have got many big difficulties if we had prolonged the equitization,” he commented.

Source: VnExpress