IPO reversal trend

IT wasn’t long ago when it seemed that only ACE Market listings were performing well, while Main Market-bound initial public offerings (IPOs) went in the opposite direction.

The Main Market listings performed so badly that it cooled investor interest in them, while the opposite was true for ACE Market flotations, where sometimes hundreds of millions of ringgit in applications flooded small offerings, leading to massive oversubscription rates.

This surge in interest was on the back of the phenomenal share price performances of the ACE Market listings.

Alas, in recent months, it is no longer an assurance that buying into an ACE Market listing will yield a winning lottery number.

Some of those shares have dipped below their listing prices, others have had a tepid performance, although one of two have more than doubled.

But it was the listing of 99 Speed Mart Retail Holdings Bhd on the Main Market that seems to be turning the tide.

Despite listing at a demanding price-to-earnings multiple of 35 with an IPO price of RM1.65 per share, 99 Speed Mart has defied the odds and now trades 50% higher than that.

This success, in turn, has got the corporate world excited and a number of large companies are rushing to get listed to capitalise on the positive sentiment surrounding the Main Market.

Hence, expect more Main Market listings.

Conversely, insiders reckon there are a combination of reasons why the lustre of the ACE Market is fading away, particularly likely to do with the market regulator’s firmer stance.

This involves both intensifying security on the approval process of ACE Market listings and imposing stricter controls on financial institutions regarding their share margin financing schemes.

In the past, these schemes may have helped market participants to drive share prices to lofty levels.