KARACHI, Nov 29: The stock markets have been jittery for the last many days on what might be the ‘strike price’ of offer of Global Depository Shares (GDS) in Oil and Gas Development Company Limited (OGDC) to international investors.
But market participants thought that the government could not afford to strike a low price, sensing the adverse impact on the capital markets and more importantly its political repercussions.
The book building process for offer of shares in OGDC to international investors would be completed on Thursday following which the strike price would be announced. “It would be senseless to sell shares at lower than the recent market price,” said an analyst.
He observed that already embroiled in the privatisation blunder of Pakistan Steel, the government would not want to face another controversy by selling shares to foreigners at unjustifiably low price.
And a senior official at the Privatisation Commission (PC) told Dawn: “We do not know who is spreading such baseless rumours (of a possible low price) and why”. He did say that the 'strike price' of the GDS would be determined by the demand curve but emphasised that “there is no intention to sell the shares of the country's largest petroleum exploration and production company at a throwaway price”.
The government is in the process of divesting its shareholding in OGDC up to 15pc by way of issuance of GDSs to local and international institutional investors and domestic market (secondary public offering in domestic market).
The (maximum) 15 per cent shares in OGDC makes a total of 645.139 million. At the closing price of the OGDC stock in local markets on Wednesday at Rs128, the government would be able to raise Rs82 billion, equivalent to $1.3 billion.
“However mouth-watering the sum may be, the government cannot afford to cast away a blue-chip at that price, for only six weeks ago the OGDC stock was priced at Rs156 a share on Oct 19 in the local markets, when the current controversy on GDS pricing began” said an equity trader.
In case of discounted price offer in book building — about which there is no indication currently-- the government has the mandate to sell less than 15 per cent shares. The official at the PC had pointed out that the government had set out to sell shares “up to” 15pc of the company’s capital and not necessarily the exact figure of 15 per cent.
Another senior official of the commission corroborated that statement and explained that approval from the Cabinet Committee on Privatisation (CCoP) for sale of OGDC shares “up to” 15pc had been obtained, but the offer need not necessarily be to divest all those shares.
The reason for seeking approval for a “maximum” number of sale of shares, instead of say 5 or 10pc was to avoid the mandatory requirement of returning to the CCoP each time to get a nod for sale of more shares, if need be.
A stock broker contended that there was hardly any precedents of sale of shares to international investors at lower than local market values.
Ten years ago in 1995, the PTCL stock was sold to foreigners at Rs55, against its market price of Rs30; and more recently shares in PTCL had been divested at Rs117, against the then ruling rate of Rs70 and so on, he said.
Mohammad Sohail, director research and equity broking at JS Capital, pointed to the recent issue of Global Depository Receipts (GDRs) of MCB: “The issuer took the average price of 8-10 days of road shows and added 0.5 per cent premium to arrive at the sale price of the GDR,” he said and added that in that case the MCB management “relied more on share offer size and raised only $150 million, so as not to put pressure on market price of the stock in local markets”.
The analyst said that the government should not just set its eyes on the dollar proceeds that it may receive from the maximum 15 per cent offer, but also consider that the offer price of OGDC GDS would be taken as a benchmark in the upcoming GDRs of other companies and banks, such as HBL, NBP, Kapco and others.
