Hibiscus upbeat despite weak debut

 KUALA LUMPUR: Hibiscus Petroleum Bhd, which has raised RM235 million from its initial public offering (IPO), remained optimistic even after seeing its stocks open at a 13.6 per cent discount on its debut on Bursa Malaysia Bhd.
The company's shares opened at 54 sen each, down by 8.5 sen from its reference price of 62.5 sen.

The lower reference price of the mother share in comparison to its IPO price of 75 sen was mainly to factor in the reference price for the company's warrants of 12.5 sen. The warrants, which were given free to shareholders in its IPO, opened with a 1 sen premium at 13.5 sen.

"This is understandable... the company is not about short term, it's about medium to long term. The value of the company will start appreciate after we make our first acquisition," said Hibiscus Petroleum chairman Zainul Rahim Mohd Zain after the listing ceremony yesterday.

Its shares closed at 53 sen, 9.5 sen lower while the warrants closed at 13.5 sen each. It means investors who got the shares and warrants at the IPO price are making a loss of slightly over 10 per cent.

An analyst when contacted said that the decline could be driven by investors selling the main shares and use the funds to buy more warrants.

The company, which is also the first special purpose acquisition company (SPAC) to be listed on Bursa Malaysia, said it will enter into several non-disclosure agreements with companies it may acquire. These agreements allow Hibiscus Petroleum to look into the companies and to obtain more information about the companies.

"Once we look at these information, we will only then decide on whether to proceed with the due diligence process," said Hibiscus Petroleum managing director Dr Kenneth Pereira.

An SPAC company is a company that is initially listed with no operations, but is formed exclusively to make acquisitions using cash raised from its IPO. It aims to take up 30 to 40 per cent stake in each target company in a deal valued less than RM100 million.

Pereira added that the acquisition may not be necessary only refer to companies, but it may also include assets.

Under the Securities Commission guidelines, 90 per cent of the fund raised would be placed in trust account and the acquisitions must have an aggregate fair market value equal to at least 80 per cent of the amount in the trust account.

Should an SPAC fail to make acquisitions within three years of listing, it must be liquidated.

Hong Leong Investment Bank Bhd is the principal adviser for the underwriting of the balloting portion to be made available for application by the public

Source: Bisnestimes