Number of auctions fail on the stock market

February, 26/2022 - 09:06
Despite an active stock market, a number of share auctions still failed, with some even cancelled, due to a lack of investors participating. 
A trader watching market movements on his computer. — VNA/VNS Photo 

HÀ NỘI — Despite an active stock market, a number of share auctions still failed, with some even cancelled, due to a lack of investors participating. 

Lê Ngọc Nam, head of Investment Analysis and Consulting at Tân Việt Securities JSC (TVSI), said that auctions of enterprise’ shares depend on the offering volume, prices and attractiveness of these businesses.

The problem here is that some businesses set high expectations leading to high reserve prices, such as the case of LienVietPostBank (LPB)’s auction. 

The Hà Nội Stock Exchange (HNX) said that as the auction, with the seller Việt Nam Post Corporation (VNPost), expired, only seven local retail investors registered to buy 800 shares, much lower than the total of nearly 122.2 million shares offered by VNPost. 

In fact, the reserve price, at VNĐ28,930 a share (US$1.27 a share), was much higher than the matching price in the stock market. During the period of investor registration and deposit payment, which lasted from January 25 to February 16, LPB's share price only traded in the range of VNĐ23,000 - 25,000 a share.

The market price of LPB closed yesterday at VNĐ23,050 per share. Therefore, the reserve price of VNPost's LPB shares auction was 25.5 per cent higher than the trading price.

LPB shares fluctuated strongly in the middle of last year after news about Nguyễn Đức Thuỵ, who joined the Board of Directors of LienVietPostBank and then became its Vice Chairman, registering to buy more shares.

Previously, LPB shares rose from below VNĐ15,000 a share in March 2021 to a peak of VNĐ30,000 in early June 2021. However, since June 7, 2021, LPB has been trading at a price lower than the reserve price offered by VNPost.

Speaking about the issue, Phạm Văn Mạnh, a retail investor, said that the stock market is recording a huge volume of stocks, while global markets are quite nervous at the moment due to a series of events, such as the tension between Russia and Ukraine, and possible rate hikes by the US Federal Reserve. 

Therefore, if auction organisations offer high reserve prices that are even higher than the matching price in the market, it is clear that investors just need to approach the wait-and-buy method which will be much more profitable, Mạnh added.

Moreover, it takes months for the purchased shares from the auction to be transferred to the buyer's account.

While the market trend is not very positive, high asking prices make the auctions less attractive to investors, with some auctions even cancelled.

Recently, the Hồ Chí Minh Stock Exchange (HoSE) said that only four local investors registered to buy shares, with a volume of 50,000 units, from an auction of Binh Duong Trade And Development JSC.

The auction failed as the order volume was only 50,000 units, 0.14 per cent of the offering volume. The average bid price was equal to the reserve price of VNĐ27,900 a share.

Previously, the company announced to offer 35 million shares to the public with a reserve price of VNĐ27,900 a share. The auction took place at 9am on February 22. After the announcement was released by HoSE on February 16, TDC’s stock price decreased from VNĐ26,000 a share to VNĐ24,400.

TDC shares ended yesterday at VNĐ24,100, nearly 15.8 per cent lower than the reserve price. 

The southern bourse also just announced the cancellation of the auction of Châu Đức Construction and Urban Development’s shares, offered by the State Capital Investment Corporation (SCIC), as there were no investors registered.

Another key reason resulting in failed auctions is that investors are not interested in shares that have not met their ownership ratio demand, said Nguyễn Duy Định, senior customer care specialist of MB Securities Company (MBS). In fact, many investors want to buy more to own a controlling stake.

On the other hand, there are still auctions that attract investors’ interest, with enterprises selling out all the shares offered for sale.

For example, HNX just announced the results of the auction of Picomat Plastic’s shares held on February 22. Picomat offered 2.7 million shares for auction, equivalent to 15.52 per cent of the total outstanding shares.

The offering price is equal to the par value of VNĐ10,000 a share. The auction had up to 120 investors participating, including one institutional investor. Total registered shares were nearly 3.1 million. The bid price ranges from VNĐ10,000 to VNĐ20,000 a share.

As a result, up to 115 retail investors won the auction. The total value of sold shares was VNĐ29.4 billion, equivalent to the average bid price of VNĐ10,934 VND a share. — VNS

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