(Petaling Jaya, Saturday): Although
Time dotCom’s RM1.89 billion IPO fell flat on its face making double
history as the country’s biggest offering as well as the biggest
flop when it was
undersubscribed by 75 per cent, Tan Sri Halim Saad is laughing all
the way to the bank.
This is because Time dotCom will be Malaysia’s only telecoms unit with zero debt with some RM 900 million in cash as the joint lead underwriters Commerce International Merchant Bankers Bhd, Perwira Affin Merchant Bank Bhd and Affin-UOB Securities Sdn Bhd had fully underwritten the issue and would now have to pay RM1.415 billion cash for the unsubscribed portion.
This will have far-reaching implications not only for the banking industry but raises the question about the future of corporate restructuring in the country.
I had yesterday said that Malaysian taxpayers are very concerned that the government would be embarking on another scandalous bailout - this time the RM1.4 billion bailout of the Time dotCom IPO undersubscription fiasco by using government-linked funds and agencies like EPF, SOCSO, Tabung Haji to take up the shortfall.
I have received the following response to my media statement yesterday:
“The mechanics of an IPO would mean that Time dotCom will not bear any shortfall from the undersubscription. By agreeing to underwrite the deal, CIMB (and the underwriter consortium) have already contracted to raise the funds for Time, and they would have to provide Time with the IPO proceeds, with or without a government bailout.“The problem now lies with the underwriters as they are have to place the remaining 75% of the offer stock without being in a position to pay for it themselves. If government agencies and public funds were used, it would be a bailout of the underwriters and not Time dotCom per se.
“The only guys happy here would be Time dotCom, as they're assured of the IPO proceeds. The losers would be the 25%, who are now uncertain as to whether the IPO would list on a premium as most analysts say this is highly doubtful.”
In the normal circumstances, where there is no extraordinary mix
of politics with business, I would agree with the response and that the
losers are the underwriters and may be the 25 per cent who had subscribed
to the IPO.
However, the widespread concerns that the final losers of the Time dotCom IPO fiasco could be the taxpayers could not be dismissed and the following questions need to be asked:
Why was the full issue of RM1.89 billion fully underwritten by the underwriters concerned when the market reaction to the IPO at RM3.30 per share was that it was over-priced and that its value was more at RM2 per share? Was there any political pressure and/or any undertaking that government-linked funds and agencies like EPF, SOCSO, Tabung Haji and other public trust and provident funds would be tapped to make up for any shortfall in the event of undersubscription?
As the market is quite unanimous that when Time dotCom makes it public debut next month, its share price will nosedive below the IPO price, managers of EPF, SOCSO, Tabung Haji and other government-linked funds and agencies should declare whether there is any government directive, written or unwritten, that they take up the subscription shortfall.
In any event, these government-linked funds and agencies should be aware that the public are very vigilant and want full transparency to ensure that these funds should not be tapped for another bail-out operation for a private company, however well-connected politically, to buy up the undersubscribed IPO portion of Time dotCom at RM3.30 per share.
(17/2/2001)