Dion Bisara, Jakarta – With public complaints growing over the allocation and pricing of shares in Krakatau Steel's recent initial public offering, both the government and the House of Representatives on Monday called for an investigation.
"Everything that does not involve state secrets can be opened to the public," said Hatta Rajasa, the coordinating minister for the economy. "It should be transparent," he added.
Hatta said the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) should investigate and disclose data on the buyers of the IPO in light of widespread speculation that the stock was priced artificially low to benefit well-connected politicians, who were rumored to have received large allocations of shares.
The offering was oversubscribed nine times, leading to outrage when it was priced at the low end of the offering range. When a group of journalists were later accused of trying to extort share placements from the company, the controversy only deepened.
Lawmakers joined calls for a probe on Monday, with House Speaker Marzuki Ali saying the offering price of Rp 850 ($0.09) per share at launch was "too low," given its rapid rise at its debut on the Indonesia Stock Exchange (IDX).
"There are many questions and demands to prove that the procedures for the Krakatau Steel IPO were conducted properly and did not violate the stock market's rules, norms and ethics," Marzuki said. "The House will ask Bapepam to conduct an investigative audit."
The underwriters, Mandiri Sekuritas, Danareksa Sekuritas, and Bahana Securities, have said the price was in line with the earning ratios of other regional steel companies, and that there was no "outside interference.".
The IPO sold 20 percent of the state steel maker's equity for Rp 2.68 trillion. The shares debuted on Nov. 10, soaring 49 percent to close at Rp 1,270. Its closing price on Monday was Rp 1,290.
Krakatau's president director, Fazwar Budjang, said the IPO should not become a public issue. "We are talking over and over about the IPO. The company would have been dying if it were not for the IPO. Now we have to make sure this national asset is strong and growing to serve the people and nation," Fazwar said.
Golkar's Priyo Budi Santoso said House Commission VI, which oversees government-run companies, would summon Hatta and State Enterprises Minister Mustafa Abubakar. "These officials need to explain the process to the public," Budi said. Asking Bapepam to disclose the buyers of the shares could also set up a regulatory showdown.
Fuad Rahmany, the head of Bapepam, declined to comment on the issue on Monday, but he earlier warned against disclosing the buyers. "The market will not be healthy if data can be disclosed arbitrarily," Fuad said last week.
He also said the capital market law guaranteed the confidentiality of buyer data, which can only be disclosed in a criminal probe. The law, however, states that Bapepam can access the data, and experts say this could open the door for disclosure.
Drajad Wibowo, an economist from Sustainable Development Indonesia, said the law gives the agency room to reveal the data. "Bapepam should be able to promote transparency, instead of covering up," he said.
Former IDX president Mas Achmad Daniri, head of the independent Krakatau privatization monitoring team, cautioned against politicizing the share sale, which he said followed the rules.
"The authority to disclose investor data lies with Bapepam. But disclosing the data could hurt investor confidence. Don't let this Krakatau share sale hurt investor confidence in Indonesia," he said.
[Additional reporting by Faisal Maliki Baskoro, Yanto Soegiarto and Armando Siahaan.]