Chemoil Energy: The one that got away
Chemoil Energy announced yesterday that it was withdrawing the IPO, giving 'considerations relating to valuation' as the sole reason for backing out.
Joint bookrunners JPMorgan, Morgan Stanley and UBS had decided to lower the bottom end to US$0.55 per share on the final day of bookbuilding, compared to the initial price range of US$0.65 to US$0.85, even though this would have raised much less than the intended US$374 mln.
It would have been the second largest IPO after Thai Beverage to launch this year on the Singapore market, had it proceeded with its decision to list. It first announced that it intended to list on the SGX exactly a month ago, citing that Singapore's 'good corporate governance' made it an ideal place.It did not want to list in the United States, stating that its obligations under the Sarbanes-Oxley Act made it very expensive to launch an IPO there, even though the marine fuel supplier was based in California.
Chemoil has given no indication that it will seek to list in Singapore or any other Asian bourse in the near future.
It seems investor interest in the company was insufficient, despite all the media attention and a one-day extension for placement.
There could be several reasons behind the lackluster performance for the placement of Chemoil's shares.
First, the falling oil price, close to the psychological barrier of US$60 per barrel, might have scared off investors on the concern that demand for fuel was declining.
Second, as Jean Chua from the Business Times wrote, quoting an unnamed source, 'The company does not have peers within the Singapore market or globally, so it was a bit difficult to understand.'
While it may be difficult to understand what the company does, there are numerous sources where investors can get information about the company.
There would have been roadshows organised at Raffles Place, there is the company website and there was no shortage of media coverage regarding the IPO.
So there is not excuse really to not to try to understand what the company does.
Also it is good that the company does not have peers in what it does, because it means that there is no competition at all.
At the end of the day, it it might boil down to the fact that maybe the Singapore market is not ready for a pioneer of an IPO like Chemoil.
Joint bookrunners JPMorgan, Morgan Stanley and UBS had decided to lower the bottom end to US$0.55 per share on the final day of bookbuilding, compared to the initial price range of US$0.65 to US$0.85, even though this would have raised much less than the intended US$374 mln.
It would have been the second largest IPO after Thai Beverage to launch this year on the Singapore market, had it proceeded with its decision to list. It first announced that it intended to list on the SGX exactly a month ago, citing that Singapore's 'good corporate governance' made it an ideal place.It did not want to list in the United States, stating that its obligations under the Sarbanes-Oxley Act made it very expensive to launch an IPO there, even though the marine fuel supplier was based in California.
Chemoil has given no indication that it will seek to list in Singapore or any other Asian bourse in the near future.
It seems investor interest in the company was insufficient, despite all the media attention and a one-day extension for placement.
There could be several reasons behind the lackluster performance for the placement of Chemoil's shares.
First, the falling oil price, close to the psychological barrier of US$60 per barrel, might have scared off investors on the concern that demand for fuel was declining.
Second, as Jean Chua from the Business Times wrote, quoting an unnamed source, 'The company does not have peers within the Singapore market or globally, so it was a bit difficult to understand.'
While it may be difficult to understand what the company does, there are numerous sources where investors can get information about the company.
There would have been roadshows organised at Raffles Place, there is the company website and there was no shortage of media coverage regarding the IPO.
So there is not excuse really to not to try to understand what the company does.
Also it is good that the company does not have peers in what it does, because it means that there is no competition at all.
At the end of the day, it it might boil down to the fact that maybe the Singapore market is not ready for a pioneer of an IPO like Chemoil.
Comments:
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I doubt this is only an issue that focuses on Singapore or SGX's ability to list large companies.
Firstly, the underwriters/bookrunners, are investment houses on a global scale. If JPMorgan, Morgan Stanley and UBS can't convince their clientele, high net worth or not, local or not, to invest in this IPO, i doubt an issue of where it will be listed is the real issue at hand. Being a 'global' company, it should have 'global' investors, fund houses etc etc.
Put another way, I feel this listing, whether on SGX, ASX, the Hong Kong stock exchange or TSE wouldn't have made a huge difference.
Secondly, although i'm not an expert on listing rules, I do think Singapore has an advantage and that is precisely why Thai Beverage has chosen to list here. Sure there may be some arcane rules such as the takeover code etc. but we definately have a better and deeper capital market then our closer neighbours.
Therefore, I would say that it is a tough call to say the Singapore market is not the right market for the listing. Perhaps the global market just wasn't interested at this point?
However, if the point to be made was that there was not enough Singaporean investors (or not enough sophisticated Singaporean investors), then I would agree.
On another note, why choose global bookrunners when a local house might very well do the job better, and be closely connected to asian HNWI's? A local house may have been able to garner more support from the local market.
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Firstly, the underwriters/bookrunners, are investment houses on a global scale. If JPMorgan, Morgan Stanley and UBS can't convince their clientele, high net worth or not, local or not, to invest in this IPO, i doubt an issue of where it will be listed is the real issue at hand. Being a 'global' company, it should have 'global' investors, fund houses etc etc.
Put another way, I feel this listing, whether on SGX, ASX, the Hong Kong stock exchange or TSE wouldn't have made a huge difference.
Secondly, although i'm not an expert on listing rules, I do think Singapore has an advantage and that is precisely why Thai Beverage has chosen to list here. Sure there may be some arcane rules such as the takeover code etc. but we definately have a better and deeper capital market then our closer neighbours.
Therefore, I would say that it is a tough call to say the Singapore market is not the right market for the listing. Perhaps the global market just wasn't interested at this point?
However, if the point to be made was that there was not enough Singaporean investors (or not enough sophisticated Singaporean investors), then I would agree.
On another note, why choose global bookrunners when a local house might very well do the job better, and be closely connected to asian HNWI's? A local house may have been able to garner more support from the local market.
# posted by 
: Thursday, October 05, 2006 12:37:00 AM
: Thursday, October 05, 2006 12:37:00 AM << Home
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