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AREIT might just go high-yield, was it oversubscribed?

Prior to the AREIT listing date, AREIT sponsor – Ayala Land, Inc. (ALI) disclosed to the Philippine Stock Exchanged that the AREIT IPO was oversubscribed by twice the base offer, with “high-quality” domestic and international institutional investors participating in the book-building notwithstanding the continuing coronavirus (COVID19) pandemic. The “oversubscription” was widely reported in various news outfits including the inquirer.net.

Despite the reported overwhelming demand for AREIT, AREIT plummeted to a low of 23.85 at the second day of trading. Subsequent disclosure, showed that BPI Capital Corporation, on the first day (August 13, 2020) of trading bought 10,356,400 AREIT shares at an average price of 26.8594 a share. 10.4 Million shares is no small number, yet AREIT on the following day falls to a low of 23.85 a share. Can you imagine the fall if BPI Capital Corporation did not buy 10.4 Million AREIT shares to stabilize the price? BPI Capital Corporation is one of the joint lead underwriters of the AREIT IPO.

The stabilization activities of BPI Capital Corporation (BPI) compelled it to buy a total of 35,184,800 AREIT shares at prices ranging from 24.10 to 26.8594 (average of 26.0618) from dates August 13, 2020 to September 11, 2020. What the investors paid for 27 pesos a share, BPI bought it for only 24.10 to 26.8594 a share.

On September 11, 2020 BPI notified ALI that BPI elected to only partially exercise the overallotment option. The over-allocation option shares or the optional shares total to 45,688,700 additional shares roughly the same number of shares that was allocated to local small investors at 45,688,300 shares. But don’t be mistaken, the optional shares will be sold as part of the institutional offer.

The stabilization of the share price of AREIT cost BPI Capital Corporation (BPI) 920 Million Pesos. When AREIT was plummeting, we have not seen a mad dash by institutional investors to grab AREIT. What now for the AREIT shares held by BPI? Will BPI keep it on their balance sheet and used a fraction of their precious capital to accommodate the shares?

Now is not yet the time to dip into AREIT. Wait, it can still go high-yield from here.

Disclaimer and Disclosure: This is an independent analysis for discussion purposes with the aim of giving stock traders and investors an independent view point.  Accuretti Systems Inc. in the course of day to day trading may have own, or is considering buying or disposing, the shares of the companies mentioned in this commentary.

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