‘Strong hands’ set to absorb up to two-thirds of GCash IPO shares

Insider Spotlight

• Cornerstone investors are expected to subscribe to about P36.5 billion worth of Mynt offer shares
• Their commitments could absorb up to 68.8 percent of the IPO, leaving roughly one-third of the offer available to other investors if the overallotment option is not exercised
• The cornerstone roster includes global asset managers, development finance institutions, and leading Philippine financial institutions
  
  
  
  

Institutional "strong hands" are poised to absorb up to two-thirds of Mynt's planned initial public offering, with cornerstone investors committing about P36.5 billion to the transaction before the offer opens to the broader market.

The company's prospectus shows that cornerstone investors are expected to account for approximately 68.8 percent of the offer shares if the overallotment option is not exercised, or about 59.8 percent if the option is fully exercised. Their commitments are also expected to substantially cover the institutional portion of the offering, subject to any reallocation.

The big picture

The sizable cornerstone allocation provides Mynt with a base of long-term institutional investors, commonly referred to in capital markets as "strong hands" because they are generally viewed as less likely to sell immediately after listing. The prospectus, however, states that these investors will not be subject to a lock-up requirement and will be treated the same as other investors apart from receiving their allocated cornerstone shares.

The international cornerstone roster includes BlackRock, Capital Research and Management Co., Citadel Multi-Strategy Equities Master Fund, FIL Investment Management (Hong Kong), HSBC Global Asset Management (UK), International Finance Corp., Lazard Asset Management, Ninety One, Schroder Investment Management entities, T. Rowe Price, and other global investment firms.

Several agreed to participate at a price of no higher than P6.60 per offer share, subject to customary closing conditions.

Why it matters

With as much as two-thirds of the offer already spoken for by institutional investors, the IPO enters the market with substantial demand committed ahead of pricing. Such cornerstone participation can help underpin investor confidence by demonstrating support from established global and domestic fund managers, although the prospectus makes clear these investors are not restricted from selling their shares after the offering.

Domestic cornerstone investors include ATRAM Trust Corp., BPI Asset Management and Trust Corp., China Bank Capital Corp., Metropolitan Bank & Trust Co. – Trust Banking Group, Philequity Management, and RCBC Capital Corp. Their participation remains subject to final regulatory and corporate approvals, customary closing conditions, and the final offer price.

What's next

The cornerstone commitments will take effect once the conditions in the investment agreements are met, including the completion of the underwriting process. Their participation is expected to provide Mynt with a substantial institutional shareholder base as it prepares for its stock market debut. —Daxim L. Lucas | Ed: Corrie S. Narisma