Feb 16, 2011

Garuda IPO & lack of readiness

Amid the pressure on stock price of PT Garuda Indonesia (Persero) Tbk (GIAA), which reached Rp590 at closing of Monday’s trading from IPO level at Rp750, Minister of Finance Agus D.W Martowardojo thought that the disappointment in the initial public offering (IPO) of the state-owned airline was caused by lack or arrangement before the action.
The Minister viewed that Garuda should have done a better preparation before the IPO, including completing a reverse stock. Regardless of all, Garuda has become a public company whose performance is expected to improve after the IPO.
“Garuda could have done a better preparation before the IPO. For example, making a reverse stock split,” he said on Monday.
In IPO, Garuda offered 6.34 billion stocks, or 27.89%, that included 4.40 billion new shares and 1.94 billion shares belonging to PT Bank Mandiri Tbk.
According to the agreement, three underwriters were committed to guarantee 6.34 billion shares worth as much as IDR4.7 trillion.
Those three underwriters and its affiliation were obliged to absorb 3.01 billion shares. Meanwhile, public investors absorbed 3.33 billion shares through pooling and fixed allotment.
“I think that the main task of the underwriters is to guarantee. It means that they must absorb. The must have the strategy to reduce the burden. And in business world, there are times when we gain and lose,” the minister said.
However, Agus still encouraged other state-owned companies to conduct IPO once they are assumedly appropriate to go public. Basically, the government will not hinder other state companies willing to make IPO as long as the preparation is well done, so the result will be optimal.
 
Disclosure: No position at the stock mentioned above.  

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