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IPO or Initial Public Offering is one way a company can get enlisted in a stock market. (The other indirect way is through backdoor listing.)
Through this process, a part of the ownership of an initially private company becomes available for the public to purchase, after which this company becomes a ‘publicly-listed’ or ‘publicly-traded’ company. Thus Initial Public Offering is the first time company stocks are being bought and sold, the issuing company being the only seller, and with price set at IPO Price. This IPO price is announced before the offer period, during which a lot of rumors and excitement in the market could be generated leading to the grand listing day.
Once the IPO is over, the sold shares are then traded just like other stocks with both the buyers and sellers coming from the investing public.
How to Invest in IPO’s
There are two ways for an ordinary Pinoy to participate in an IPO.
The first way is through your online broker subscription.
If you already have a trading account in an online broker, chances are they will offer some number of shares to its clients like you, and announce it in their homepage. This is really quick to do – as easy as submitting an online form – but a common challenge is the limited number of shares the broker can offer, and so allocation of shares is not guaranteed.
If there are more buy requests than the number of available IPO shares allotted to your broker (a case of oversubscription), a raffle is usually made to distribute them to the few lucky ones. If you’re unlucky, you will get no shares so you can try the second method – Local Small Investors Program (LSIP).
Other brokers like First Metro Securities allocate their available shares based on merit system (according to the number of trades ranking of each client availing of the IPO shares).
Local Small Investors Program (LSIP)
LSIP is PSE’s own initiative to encourage more small investors to participate in IPO’s and a direct way to buy IPO shares from the underwriters. A company going through an IPO must allocate shares for this program. The program is also designed to reach out to as many small investors as possible with its Php25,000 limit maximum investment amount and accepts minimum board lot. Most clients have a higher chance of securing some IPO shares with the LSIP.
The basics instructions to subscribe in LSIP are as follows (the updated instructions should come from your broker):
> Accomplish LSI forms and Signature cards provided by your broker
> Completely fill up the required details
> Go to your broker’s office (your own personal messenger is possible) to have the form stamped
> Attach photocopy of your 2 valid IDs.
> Submit the forms and photocopy of IDs to any of the receiving agents. The list of receiving agents will also come from your broker (which could include offices below) and therefore has to be verified. Personal appearance is mandatory.
PSE Ayala Office
2nd Floor, PSE Plaza
Ayala Triangle, Ayala Avenue, Makati City
PSE Tektite Office
4th Floor, Philippine Stock Exchange Centre
Exchange Road, Ortigas
Sample IPO in Philippine Stock Market
Given below is an example of an Initial Public Offering (taken from CitisecOnline – now COL Financial) of the company GT CAPITAL HOLDINGS, INC. wanting to go public in the Philippine Stock Market last April 2012.
Here you can see the usual information contained in an IPO announcement (Offer Price, Minimum number of shares, Listing date, etc) and the process on how to participate in such an undertaking as set by the Philippine Stock Exchange.
Included also is a sample IPO Request Form for those who want to avail of it through COL online subscription option.
If you try to get IPO shares through your broker subscription, you will receive an email as to whether you’re allocated shares or now, as shown below.
Allocation of 300 shares during IPO of INTEGRATED MICRO-ELECTRONICS (IMI)
Non-allocation during IPO of CROWN ASIA CHEMICALS CORP (CROWN)
Hope this gave you a clear picture of joining in IPO’s in Philippine stock market.
If you’ve got more questions, just put them in the comments below.
Have fun investing,
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