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Would You Buy DoubleDragon’s Follow-on Offer Shares at Higher Than the Market Price?

The offer price of Php30 per share is 18.8 percent above the latest closing price at the PSE
By Lorenzo Kyle Subido |

 

 

Last June 28, listed real estate developer DoubleDragon Properties announced that the final price for its follow-on offering is at Php30 per share. The company is raising fresh funds for its hospitality and industrial projects, and it stands to earn as much as Php4.5 billion if it will be able to sell all 135 million offer shares and 15 million over-allotment shares.

 

 

Related story: Injap Sia's DoubleDragon Sets Price of Follow-On Offering at Php30 per Share

 

 

However, many noted that the follow-on offer’s final price is higher than the company’s market price. The shares that are already being traded at the Philippine Stock Exchange (PSE) are cheaper than the new ones DoubleDragon is offering. When the market closed on July 4, DoubleDragon’s share price stood at Php25.25, 15.8 percent less than the offer price.

 

So why is DoubleDragon selling new shares at a higher cost?

 

In a press release submitted to the PSE last June 29, DoubleDragon Chairman Edgar “Injap” Sia II pointed out that the main targets of the follow-on offer are institutional investors that are not based in the Philippines.

 

“During our IPO (initial public offering) in April 2014, there was limited opportunity for large institutional investors to participate,” said Sia in the press release. “As we approach the completion of our 2020 targeted portfolio comprising of 1.2 million square meters or 120 hectares of prime leasable space, this is a great opportunity for key investors to take part in the hyper growth years of the company.”

 

Indeed, up to 108 million or 80 percent of the offer shares are allocated to these foreign institutional investors, which will be handled and distributed by the offer’s international bookrunners and lead managers: Credit Suisse (Singapore) Ltd., Maybank Kim Eng Securities Pte. Ltd. and UBS AG (Singapore branch). The balance is being offered locally, which are distributed to retail investors and clients of BPI Capital Corp. and Maybank ATR Kim Eng, the offer’s domestic lead underwriters and bookrunners.

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In the same press release, DoubleDragon Chief Investment Officer Hannah Yulo highlighted that the offer price “indicates the strong support of the global investing community in the strong growth prospects of DoubleDragon despite the current volatile market conditions.”

 

As well, DoubleDragon noted in the offer’s prospectus that the final offer price was based on numerous factors and not just the market price. Among the factors used by the company and the offer’s bookrunners in arriving at the Php30 price were the company’s financial position, investor demand and current market conditions.

 

“Investors should not rely on the historical market price of the common shares on the PSE as an indicator of the value of the common shares,” wrote DoubleDragon in its prospectus.

 

Established in 2010 by Sia, who co-founded the company with Jollibee Foods Corp. Chairman Tony Tan Caktiong, DoubleDragon has property developments in the retail, office, hospitality and industrial sectors. Its most prominent project is CityMall, a chain of community malls tapping the retail sector of provincial areas.

 

Interested investors are encouraged to read the offer’s prospectus for more information about the company and the follow-on offering. The offer began on July 2 and will last until July 6.

 

 

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Lorenzo Kyle Subido is a staff writer of Entrepreneur PH

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