Faisal Maliki Baskoro & Nariswari Dita Yudianti, Jakarta – Speculation that Krakatau Steel's initial public offering price was kept artificially low to benefit connected investors may cast a shadow over future share sales by state-owned companies, the markets regulator said on Thursday.
"I am worried that the controversy surrounding Krakatau's IPO might turn off future investors who want to invest in state enterprises' shares," said Fuad Rachmany, chairman of the Capital Market and Financial Institutions Supervisory Board (Bapepam-LK).
He was especially concerned about the upcoming rights issues of state lenders Bank Negara Indonesia and Bank Mandiri after concerns over the IPO pricing prompted foreigners to dump their Krakatau stock on its trading debut on Wednesday.
Foreign investors sold Rp 400 billion ($45 million) of the steel maker's shares on Wednesday on concerns that the Corruption Eradication Commission (KPK) would probe the IPO.
Lawmakers called for an investigation after the listing price was set at Rp 850, on the low end of the Rp 800 to Rp 1,150 range, despite the fact that the stock sale was oversubscribed by nine times.
Local investors eagerly snapped up the discarded shares, driving Krakatau up 49.4 percent to close at Rp 1,270.
Analysts said the stellar first day of trade was proof positive that the IPO share price was too low. The sale still managed to reach the state target of Rp 2.7 trillion.
Mustafa Abubakar, the state enterprises minister, said that Krakatau may have actually paved the way for more state companies to sell shares.
"I am happy to see that Krakatau's IPO went smoothly and that its share price is going up. However, I think that the increase is still within normal levels," he said. "I am hoping that Krakatau's strong trading debut will set a good precedent for BNI's and Bank Mandiri's right issues."
He also argued that the IPO price was a true reflection of Krakatau's value. "It had been set based on the underwriters' research," he said. "Recent media reports and analysts saying the shares were too cheap only helped boost Krakatau's debut. Personally, I say that it's not too cheap, it's proper."
Before the IPO, Mustafa had said the government planned to price the shares at Rp 1,000. He also denied that foreigners dumped the shares because of the pricing concerns.
"I saw a share debut in which foreign investors were engaged in heavy selling simply because they had already gained so much in the first day." Ito Warsito, president director of the Indonesia Stock Exchange (IDX), said the controversy was reminiscent of state-owned Perusahaan Gas Negara's IPO in 2006.
"Many investors [at that time] were called by the attorney general... because there were suspicions that the share sale had caused a state loss," he said.
Lawmakers questioned the PGN offering, saying the share price was set too low to meet the state's Rp 3 trillion target.
The State Enterprises Ministry priced the shares at Rp 11,350 each, a figure analysts said did not reflect the company's value. The sale yielded a disappointing Rp 2.1 trillion.
The ministry and underwriters Danareksa and Bahana Securities were alleged to have collaborated on an insider trading scheme, allowing some investors to realize "back-door profit" in the PGN shares.
Mohammad Alfatih, an analyst from Samuel Sekuritas Indonesia, said BNI's and Mandiri's rights issues were unlikely to be affected by the pricing allegations as long as they followed proper procedures.
BNI is looking to sell 3.37 million new shares in December, about 16 percent of its total enlarged capital, and expects to raise Rp 7-10 trillion. Mandiri hopes to raise as much as Rp 14 trillion from its February issue, selling 10 percent of its enlarged equity.