Nov 1, 2010

Krakatau Steel IPO price revised up

State-Owned Enterprises Ministry (SOE) is reported to revise up the IPO price of Indonesia's largest steel manufacturer PT Krakatau Steel (Persero) Tbk from Rp850 per share to Rp950 per share, 9 days before its trading debut at Indonesia stock market. It is embarrassed thing in the history of Indonesia's SEOs privatization.
As reported by Bisnis Indonesia today, the decision to lift up the IPO price was taken by SOE Minister Mustafa Abubakar, directors of Krakatau Steel, and three underwriters on Saturday-Sunday last week.
According to Bisnis Indonesia's sources, Mustafa had asked to revise up the final IPO price, while  local underwriters, Bahana Securities, Danareksa Sekuritas, and Mandiri Sekuritas didn't have any alternative options.
"Today, Mustafa is scheduled to explain the background story behind the price revised up," the sources said.
Indonesia's SOEs privatizations history are mostly engulfed by resistances from many parties, especially political parties.
It is a normal situation. As long as Mustafa, underwriters, and KS directors can explain and convince that the final price, at Rp850, is reasonable, they can go forward. Look at what former SOEs Minister Laksamana Sukardi when he determined to sell PT Indosat Tbk (ISAT) to  Singapore Technologies Telemedia.
The problem is Krakatau Steel seems the first privatization project for Mustafa Abubakar. For sure, he will listen and respond what political parties' statement.
Sloppy allocation 
A source close to the deal said each brokerage which joins the underwriter syndication will get 400 lots (200,000 shares).
"If a broker manages 400 individual clients, one of them will get an odd lot. in fact, many said have been offered Krakatau Steel shares by certain parties at 6%-10% premium price or Rp901-Rp935 per share," the source said.
In Krakatau Steel IPO, many parties might be indicated to be flippers, eyeing capital gain from the first day trading. 
Disclosure: No position at the stock mentioned above. 

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