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Catina asks:

US$ 4.72 billion in capital raised showing strong economic sentiment.

The Middle East markets raised US$ 4.72 billion from 13 IPOs in the second quarter of 2008 compared to US$ 3.9 billion in the same period in 2007.

The capital raised was 20% higher than amounts raised in the first quarter of 2008.

The figures were today announced by Ernst & Young today.

Saudi Arabia’s Al Inma Bank was the largest IPO in the Middle East in the second quarter of 2008 raising US$ 2.8 billion which amounted to 60% of the total funds raised.

Saudi Arabia’s Rabigh Refining and Petrochemical Company and Mobile Telecommunications Company Saudi Arabia combined accounted for 75% of the capital raised in the first quarter of 2008.

Other large IPOs in the region included Mohammad Al Mojil Group with US$559.94 million.

The UAE’s DEPA United Group raised US$432.3 million and was followed by two Egyptian companies - Palm Hills Developments with US$348.22 million and Maridive and Oil Services with US$272.93 million.

According to Azhar Zafar, Head of Mergers & Acquisitions, Ernst & Young Middle East, “There were 52 IPOs during 2007 and in the first half of 2008 there have been 26. The total capital raised in the first half of 2008 amounted to US$8.69 billion compared to US$4.83 billion from 33 IPOs during the same period last year.

The trend in the market is fewer but larger IPOs. IPOs continue to be oversubscribed in most instances, which reflects the continued appetite for IPOs in the market, for now.”

Phil Gandier, Head of Transaction Advisory Services for Ernst & Young Middle East, added, “although the drop in number and amount of capital raised in IPOs has been more severe in mature global markets, the region has shown some resilience as a result of liquidity created on the back of continuously increasing oil prices.

Less uncertainty in the East

Gandier said expectations for the rest of the year remain optimistic due to the large number of announced and to-be-announced IPOs. Companies that have either withdrawn or postponed their IPOs would revisit going public once they realize that market conditions in the Middle East region are less fraught with the uncertainty that is persisting in other regions.

Globally, the size of IPOs taken for two quarters on aggregate was roughly half as much as the 2007 while more IPOs have been postponed or withdrawn in the first six months of 2008 (177) than in all of 2007 (169).

In the second quarter of 2008, a total of 258 IPOs worldwide raised US$37.4 billion in capital. This compares with 247 IPOs worth US$41.2 billion in the previous quarter. However, compared with the same quarter in 2007, total capital raised fell by 59% (from US$90.4 billion to US$37.4 billion) and the number of deals more than halved (from 567 to 258). The BRIC states (Brazil, India, China and Russia) accounted for 76 deals worth $11.8 billion in the second quarter.

Emerging markets continued to drive activity in the second quarter with China leading the way in both value (US$6.2 billion) and volume (56 IPOs). Seven of the top 10 and 15 of the top 20 IPOs by capital raised were from emerging markets.

Four countries accounted for half of the capital raised globally: China (US$6.2 billion); Brazil (US$4.6 billion); United States (US$4.3 billion); and Saudi Arabia (US$3.4 billion). The most active countries in terms of number of deals were China (56); Poland (21); and Australia, South Korea and India (17).

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Esmeralda asks:

The company I want to research was previously traded on the Toronto Stock Exchange. I would like to find the historical stock price information from the date of the IPO (8/2002) to the date the company was acquired by a private equity buyer (~7/2007).

Floyd asks:

I am very new and have a few thousand to play with. Im thinking Scottrade or E-trade. Thoughts?

Nyla asks:

It is a testing time for the capital market regulator the Securities and Exchange Board of India. If it approves Reliance Power (RPL) Initial public offering (IPO) draft red herring prospectus (DRHP) in as is form than it will open the back door for unscrupulous promoters for asset striping and increasing their stake at the lower price while forcing other investors to invest in the company at higher prices. This will create imbalance in terms of risks associated with the investment in the IPOs. The public shareholders will face higher risk than promoters of the company.

The purpose of setting up of SEBI is to protect the interest of small investors. Hence the all the relevant SEBI guidelines and regulations are targeting at safeguarding the interest of small investors. If the RPL DRHP is cleared by SEBI without any changes, than it will create ripples in the capital market. Dubious promoters will line up to exploit the investors in Anil Ambani’s style.

The case in point is RPL who has filed its RHDP for the SEBI approval. The fine print of RPL DRHP prospectus draws attention at the dubious means adopted by Anil Ambani to transfer the various projects from Reliance Energy to Reliance Power and merging “dubba company” shell company called Reliance Public Utility Ltd (RPUL). Further the promoters of RPL are doing majority of investment at Rs. 2 per share where as the same shares will be offered to general public at Rs. 60 or at premium. If SEBI passes this RPL offer document in as is form than it will set wrong precedent in the market. The promoters will invest at lower price by merging shell companies and taking advantage of loopholes in the regulatory systems.

Anil Ambani, the promoters of RPL have to contribute in cash at the IPO price, so that the promoters take the same financial risk as the IPO investors.

The issue in reference is the minimum ‘promoters’ contribution’ to be brought in by the promoters - Reference clauses 4.1 to 4.6 of SEBI (Disclosure and Investor Protection) Guidelines, 2000. As per clause 4.1.1, the promoters shall contribute at least 20 per cent of the post issue capital, in a public issue by an unlisted company. As per clause 4.6.2, the promoters have to contribute this 20 per cent at least at the IPO price, if they have contributed this 20 per cent during one year preceding the public issue.

SEBI guidelines have been blatantly violated to perpetrate deception on the prospective investors in the IPO of Reliance Power Limited.

Anil Ambani decided to float an IPO of Reliance Power Limited in last week of July 2007. Without risking his money in the project, he still wants to retain majority control in Reliance Power.

To fulfill his greedy and malefied intention, the following modus operandi was carved. The Anil Dhirubhai Ambani Group a group had an existing shell company called Reliance Public Utility Private Limited (RPUPL). RPUPL, at that time, had a paid up capital of Rs 1.0 lakh. The authorized capital of RPUPL was increased to Rs 1000 crores by a resolution dated July 30, 2007. Anil Ambani’s personal investment company and Reliance Energy Ltd (controlled by him) invested Rs 500 crores each, in the equity share capital of RPUPL on August 3, 2007. RPUPL is still a shell company with just Rs. 1000 crores of share capital and Rs. 1000 crores investment (The Rs. 1000 crores investment will naturally be made only in Anil Ambani’s group of companies. Thus no money would have gone out of the group). Simultaneously, RPUPL and RPL boards passed the proposal for merger of RPUPL into RPL. Both the companies filed a scheme of amalgamation in the Bombay High Court in the first week of August 2007, that is, immediately after infusion of Rs 1000 crores in RPUPL. The rationale of the merger, as stated in the Scheme of Amalgamation was “RPUPL has put in considerable efforts in acquiring necessary technical and manpower skills which are ancillary to the business of RPL. RPL can take benefits of this specialised skill sets and technology available with RPUPL to undertake mega power project and implement them more efficiently and successfully,” (one is unable to understand how the shell company, having only Rs. 1 lakh capital till July 31, 2007, acquired the skill sets to implement a mega power projects. In fact Reliance Energy Ltd (REL), which the one of the largest power companies in India, was already a shareholder in Reliance Power and Reliance Energy’s technical experience have been used by Reliance Power to bag mega power projects.

The High Court of Bombay approved the merger on September 27, 2007. The order was filed with ROC on September 29, 2007, making the merger of RPUPL into RPL effective from that date. On September 30, 2007 RPL allots 250 crores shares of Rs. 2 each at par to AAA Project Venture Private Limited and REL, who are the erstwhile shareholders of RPUPL.

As a result of this ploy, Anil Ambani and REL both acquired, on September 30, 2007, 250 crores shares of Reliance Power each for a consideration of Rs. 1000 crores only. This was also infused into RPUPL only on August 3, 2007, within one year prior to public issue. These 250 crores shares of Reliance Power which, have been allotted to Anil Ambani’s personal investment company and REL pursuant to the amalgamation, apparently becomes eligible for exemption under clause 4.6.4 of SEBI (DIP) guidelines with respect to promoters contribution. Thus, Anil Ambani, as the promoter of Reliance Power, has avoided investing a huge amount as promoter’s contribution at the IPO price and passed on the entire risk of the project to the prospective investors to his personal gains.

It is apparent that the High Court was not aware of the ulterior motives behind the merger of RPUPL, a shell company into Reliance Power. The merger has been sanctioned by the High Court on the basis of the facts put before it and since the shareholders of both RTUPL and RPL would have approved the merger. The shareholders of both Reliance Power and RPUPL are Anil Ambani’s investment companies and a representative of Reliance Energy. Reliance Energy owns 50 per cent of Reliance Power. This merger proposal has never been taken to the shareholders of REL, who would have presumably questioned the need for and looked into the merits and demerits of the merger of a shell company into RPL.

Press reports state that Reliance Power plans to raise approximately Rs 8000 crores by issuing 130 crores equity shares of Rs 2 each. Thus the approximate issue price per equity share is expected to be Rs 60 per share. Ambani, as one of the promoters for his acquisition of 113 crores shares (10 per cent of post issue share capital as per the prospectus) at a price of Rs 50 per share, should have invested Rs 6780 crores. Against this, by misusing the exemptions in the SEBI guidelines intended for genuine merger, he has acquired this 10 per cent by spending only Rs 690 crores. In fact, the subscription by Ambani of 8 crore share at the IPO price is an eyewash to divert public attention.

Thus, at the expense of prospective investors, Ambani will gain approximately Rs 6000 crores (assuming the IPO price to be Rs 60 per share). In fact, as per clause 3.7.1 (i) SEBI guidelines, a company cannot make a public issue of Rs 2 face value share at the price less than Rs 500 each. Hence, in case Reliance Power issues the shares at the price of Rs 500 per share, Ambani will gain upwards of Rs 55,000 crores at the expense of the future investors of Reliance Power.

Thus the total loss to the prospective investors in Reliance Power will be Rs 12,000 crores (assuming IPO price to be Rs 60 per share). If the IPO price is Rs 500 as mandated by SEBI regulations, the loss to the prospective investors will be Rs 1,10,000 crores. In fact, the loss will be to the general public who will invest in the public issue, and also to the public financial institutions and banks, who will invest common man’s money in this public issue.

The above facts clearly point out a fraud being perpetrated on the investors and SEBI should immediately stop the public issue and not approve the prospectus. If SEBI approves this prospectus, it will be a disservice to the future investors in public issues and SEBI would not be discharging its responsibilities in a proper manner. It will set a dangerous precedent. From now on, every promoter in India would subvert SEBI (DIP) guidelines in the same manner. If SEBI approves this prospectus, they would be unable disapprove any public issue made in future, in the above manner. In fact, if this public issue is allowed, it may raise serious questions on the effectiveness of the regulatory framework of capital issues in Indian capital market.

To protect the interest of small investors and setting correct precedent that all are equal in the eyes of law, SEBI should ask Anil Ambani and REL to pickup entire stake in RPL at IPO price offered to other investors and thereby providing level playing field.

Further, in case of RPL it has not paid any consideration to Reliance Energy Ltd (REL) for acquiring all the projects awarded to latter. This means that the projects under RPL have no value, than why RPL planning to raise money through IPO at premium?

SEBI should look at all the irregularities and should come out with stringent action to set the correct precedent for the promoters and capital market participants that the law of the land is supreme.

Pearlie asks:

Singapore-based Ascendus India Trust has scored a major first by launching the first ever initial public offering (IPO) which raised funds on the Singapore Stock Exchange with the aim of owning real estate in India.

The IPO size was 500 million Singapore dollars while the offer price was 1.18 Singapore dollar, officials of JPMorgan, the sole financial advisor and joint bookrunner for the mega issue, said today.

In a presentation made to the media, Kaustubh Kulkarni, Executive Director, Real Estate, JPMorgan said Ascendus India Trust (AIT) was set up in Singapore “with the objective of owning income-producing real estate used primarily as business space in India”.

AIT’s initial portfolio comprises four world class business parks in three IT centres in India. It plans to grow organically and also through acquisitions.

The investors were indicated that they could expect an yield of 4.75 per cent in FY08 and 5.81 per cent in FY09 on their investment in AIT shares. Incidentally, the regulations there allow a company to indicate possible returns on investment.

Meanwhile, in a research study on real estate scenario in India, JPMorgan has said the industry is in the foothills of a sustained growth period. It expects the industry to grow from $50 billion in FY07 to $90 billion by FY11.

Referring to rising property prices, it said the prices seem to be at risk given concerns about rate hikes and potential oversupply. The study said the correction in certain micro markets cannot be ruled out but “we are still not in a bubble zone and that a bust is unlikely.

For more information on Real Estate Agents, MLS visit Propertiesmls.com

Source: IndiaRealEstateblog

Jasmine asks:

Did AOL’s IPO jump like Google’s IPO?

*I’m talking about the old AOL - the mother of growth stocks - not today’s (AOL) Time Warner.

Shaina asks:

I need to find the number of corporate board members, name of those members, date founded,date public(IPO, date traded on stock market), other companies they own and the future outlook for the company for yahoo, mattel, thq, and disney.. where can i find these?

Marco asks:

I heard that retail investor would be alloted only 30 shares of the Rel Power IPO irrespective of the size of the application (anywhere between minimum to 1 lac), is it correct?

Brittanie asks:

With the increase in personal wealth in Australia in recent times, many individuals who are classified as ‘wholesale’ or sophisticated’ investors, don’t even know it. More importantly they could be missing out on some investment opportunities simply because of their investor status.

Firstly, what exactly is a sophisticated or wholesale investor? Well, in the eyes of the Corporations Act 2001, a wholesale/sophisticated investor is someone who meets at least one of the following tests:-

• Has net assets of more than A$2.5m and supplies an Accountants Certificate confirming this

• Has income of at least A$250k over the last two financial years and supplies an Accountants Certificate confirming this

• Is investing $500k or more into the opportunity

If you don’t meet at least one of the above, you are deemed as a retail investor (unless you can meet one or more much more stringent tests which most investors would not qualify for).

So what is the advantage of being a wholesale investor? How does this help with your investing?

The answer is simply that in the eyes of the Corporations Act, someone who has met one of the above criteria, is more knowledgeable when it comes to investing. Therefore they can invest into pretty much anything.

There are quite a number of investment products that are only available to wholesale or sophisticated investors. The reason being that they are more complex that the average IPO or managed fund.

The other reason why these opportunities are only available wholesale investors, is because wholesale investors are exempt from the 20/12 rule. The 20/12 rule limits the number of retail investors who can invest into a particular opportunity to 20 within a 12 month period.

Usually there is no limit to the number of wholesale investors who can invest, which is why they are preferred by certain promoters of opportunities.

Also, the fact that wholesale investors can usually invest a larger amount of money makes them all the more attractive to promoters.

Some of the opportunities available to wholesale investors are:

Pre-IPO offers

This is where a company does a capital raising usually within about the last 12 to 18 months prior to going public. Shares are usually offered at a discount to the IPO price. These opportunities are available through certain brokers, investment banks and corporate advisory firms.

Private Placements

This is where a publicly listed company wants to raise more funds, usually for expansion or for an acquisition. Say they are raising $4m, rather than going to lots of small investors, they go to 8 wholesale investors who invest $500k each. This is a much easier and faster way of raising the capital. The benefit to the investor is that, in most cases, they receive their shares at a discount rate to the current trading price. Say the stock is trading at $1.00 on market. The private placement may be priced at $0.80. Meaning you make 20% return on day one.

Funds

There are certain funds that are only available to wholesale investors. Private Equity funds are one such example. They are specifically set up to accept money from high net worth individuals and institutional investors. These funds have a target IRR (Internal Rate of Return) of around 25% pa.

To learn more about wholesale or sophisticated investor opportunities, contact your stockbroker or private wealth manager. Alternatively you can establish a relationship with a investment banking or corporate advisory firm who specialises in wholesale opportunities.

© Len McDowall, Integral Capital Group 17th September 2007-09-17

Stacey asks:

I would like to ask a detailed question. Let us consider a company releasing shares in the initial public offer (IPO). The people at the stock market buy the shares. The company gets the required money. The company put the collected money into its business. Meanwhile, the stock is traded in the share market. Sometimes the share price goes up sometimes goes down depending upon various market dependent and market independent parameters. My question is in what way the company is affected by the fluctutaion in its share prices? Because, the company neither gains any profit when its share prices are up nor loses when its share prices are down. Because, the company has collected the money already. So, the company, its owners and its business are not affected by the share price of that company. It is the poor investers who buy and sell the stock are affected. Am I right? If I am right, why dont we call this as a pure gambling?