KARACHI, July 19: On Monday, people flocked to branches of the 18 bankers to the offer for shares in Pakistan Petroleum Limited on the first day of the four days that the subscription list will remain open.
Not necessarily everyone of them knew what exactly were shares, stocks and IPOs, but what all of them understood was that it was a form of "lottery" where a winner would receive almost instantaneously twice the money he puts at stake.
"We received 198 applications on the first day," said a manager of a bank in Jacob Lines. He claimed that in some of the earlier issues, total number of applicants who turned up in two-three days that the initial public offerings (IPOs) were open for subscription, totalled to just about 200.
The government has put on offer 10 per cent shares in Pakistan Petroleum Limited (PPL) out of its paid-up capital of Rs6.850 billion. In case of oversubscription, which almost is certain to be, the Privatization Commission could exercise a greenshoe option of offering additional five per cent stock.
The 15 per cent divestment of fully owned equity of the government in PPL will amount to Rs1.028 billion. Since the commission has already announced to give priority to the investors in the minimum lot of 500 shares, as many as 205,751 small applicants will be able to make tremendous gains of over 100 per cent almost immediately if they succeed at the ballot: Offered at Rs55 a share, buyers were willing to pick up the stock at Rs110 on the KSE's provisional counter on Monday.
Small investors who understood a bit of the stock business, were slightly discomforted in the morning. Everyone was then discussing a news item that had appeared in an Urdu daily on Sunday, suggesting that it would be necessary for all subscribers to open an account under the 'Investor Accounts Services' (IAS) in the Central Depository Company (CDC).
The report had perhaps misinterpreted the subject matter of a handout issued by the Privatization Commission on Saturday, which among other things said: "Prior to the subscription period, investors are advised to open their individual accounts at the CDC for receiving the shares early.
People opting for physical shares will need at least one extra month to be able to sell their shares." The PC quickly disowned the news item on Monday, stressing that investors opting to receive share certificates in physical form were equally eligible to apply and no variance was intended.
The Karachi Stock Exchange also came up with a notice to all members/investors by the evening. It reiterated that applicants for shares in PPL "may exercise the physical or scripless option.
There is a separate box on the top of the application form for exercising the option." The bourse stated that applicants exercising the scripless option might apply through (i) His/her own CDC Investors Account; (ii) Sub-Account maintained with the broker; or (iii) Member's Group Account.
The KSE noted that successful applicants exercising the physical option would receive their shares through the respective bank branch. "Since all the transactions in the shares of the company will be settled through CDC, it will be required to de-materialize the physical shares," the KSE stated and added that it was, therefore, preferable that investors should open their own investor's accounts with the CDC.
"However, there is no compulsory condition of opening an account with the CDC prior to making application for shares of the company," the KSE said, which brought a bit of cheer to small shareholders whose holiday on Sunday was spoilt because of the uncertainty.