Samudra Energy postponed its S$248 million to S$276.3 million ($200 million to $222.8 million) initial public offering on Wednesday after running up against weak market conditions.
The Indonesian junior exploration and production company was unlucky that the last few days of its roadshows coincided with a global deterioration in investor sentiment towards equities. As a result, sources close to the deal said the order book never picked up momentum and closed only 1.3 times covered at the bottom end of the indicative price range on August 6, the day the company was scheduled to fix its final offer price and allocate the institutional tranche.
While a deal could still have been done at these levels, institutional investors would have been stuffed with full allocations and the transaction would have almost certainly traded down once it listed on the Singapore Stock Exchange. So instead the company said it would wait for more favourable market conditions — a decision that highlights the experience of Samudra’s chief executive and financial officers, who were both previously investment bankers.
“The size of the order book, the valuation and the secondary market support were not what the company was looking for,” said one banker close to the transaction. “Samudra still wants to engage with investors, but not like this.”
Global equity markets started souring last Friday following a sovereign default by Argentina and the release of poor economic data in the US and China, the world’s two largest economies. Rising tensions over Ukraine and Gaza added to the negative momentum at a time when investors were already worried about whether valuations look too stretched.
The Straits Times Index is consequently down 1.6% so far in August, having risen 3.6% in July. Likewise, the Jakarta Composite Index has fallen 1.2% this week after climbing 4.2% in July.
Shares in Samudra’s direct comparables have also been under selling pressure. Investors who participated in KrisEnergy’s IPO in 2013 are sitting on losses of more than 30% and the stock has fallen a further 5.8% since Samudra launched roadshows on July 25.
Singapore-listed RH Petrogras has also fallen 7.5% over the same period.
“I don’t think the new issue market is completely closed,” one banker said. “Money is still available for the right deals and fund managers are relatively positive towards China where they feel valuations are reasonable and reform is on the cards.”
Samudra had been pitching its 131.1 million primary share deal at S$1.89 to S$2.11 per share. Institutions and retail investors were being offered 90 million shares, while 45.1 million had been allocated to four cornerstones investors.
The lead managers are CIMB, Credit Suisse and Nomura.