Tuesday, September 27 2016

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’Book building’ method may improve SOE equitisation

Update: September, 02/2016 - 09:45
The Ministry of Finance may use a “book building method” in selling the State’s holdings in State-owned enterprises (SOEs), Vũ Bằng, chairman of the State Securities Commission, told local media.— Photo tinnhanhchungkhoan.vn

HÀ NỘI — The Ministry of Finance may use a “book building method” in selling the State’s holdings in State-owned enterprises (SOEs), Vũ Bằng, chairman of the State Securities Commission, told local media.

“Book building” is the process which defines the selling price at an initial public offering (IPO) upon demand from institutional investors as they indicate the expected number of shares they want to buy and the prices they are willing to pay.

The new method may become an effective and attractive way for investors besides the three existing methods, which are public auctioning, private placement and underwriting process, according to Bằng.

The new method would allow underwriters to co-operate with sellers to introduce products to potential investors and help SOEs attract strategic investors because the selling prices were made upon the study of market demand and negotiations with big buyers from the beginning.

The State could earn more from the divestment of SOEs and avoid making losses as the selling price is now public and broadly known, Bằng said.

The State sold its stake in 478 SOEs during 2011-15 period, but it still owns half of the capital in 60 per cent of those companies.

Some companies offered 30-40 per cent of the State’s ownership but only a small part of that was sold. For instance, Viglacera offered 26 per cent but transferred only 8.5 per cent, Bạch Đằng Construction Corporation offered 27 per cent but sold only 5.4 per cent.

Since the beginning of this year, the State has withdrawn from 58 SOEs with a successful rate of 66 per cent, stock exchanges have also collected nearly VNĐ1.9 trillion (US$85.2 million) for the State budget from 21 auctions with a successful rate of 73 per cent.

This year’s results are better that previous years, however, problems still exist as initial public offering (IPO) auctions and sales of remaining State’s ownership in SOEs have remained unattractive, Bằng said.

Brokerage firms need to perform transparently and accountably

The success of SOE equitisation depends not only on the way to define selling prices but also on the quality and transparency of the company on sale and the consultancy firm (securities firm).

An important factor for successful equitisation of SOEs is the preparation of the company’s financial report, Đặng Quyết Tiến, deputy head of the Corporate Finance Department under the Ministry of Finance, said.

Some consultancy firms even use the original corporate financial reports to complete the profiles without assessing them, he said.

This action often makes the auctions avoid public attention and benefit buyers and sellers as the auctions are only for the sake of public appearance to assist related sides achieve their goals, according to Tiến.

Consultancy firms must be aware of their responsibilities and benefits in order to improve the transparency of SOE equitisation, he said.

Those companies must take responsibility if the State only manages to claim a few from its stakes in the SOEs, he added. Divestment from SOEs could bring back $25 billion to the State budget in the future.

Meanwhile, the State should pay high prices for good and professional consultants, which would encourage and motivate securities firms to perform their duties well and stop serving a specific group of investors with private interests.

Brokerage firms should do their best to draw attention from the public and potential investors on the sales, and work with other brokerage companies to improve the network between investors and SOEs, Lê Hải Trà, deputy director general of the HCM Stock Exchange, said.

Brokerage firms should help companies develop good post-equitisation business strategies and connect them to potential investors, Việt Capital Securities Company (VCSC) commented.

When many investors pay attention to a company at the same time, the auction for that company would be competitive and ensure the State’s capital does not lose out, VCSC said. — VNS

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