The Ignitis IPO assessments differ day and night – some say it’s a good thing it happened, others call it a huge failure.

As you know, during the IPO last week, 20 million euros were distributed for 22.5 euros. Share.

According to SEB Biržos laikmatis, on the first trading day, 5.7 million Ignitis grupė shares were transferred on the Vilnius Stock Exchange. The closing price is 22.30 euros or 0.89%. below the initial public offering price (22.50 EUR).

At the time, the price of international certificates of deposit on the London Stock Exchange was even lower at the end of the trading session: 21.30 euros or 5.33%. below IPO prices.

“The first two days are easily negative. It seems that some of the participants in the IPO participated and bought shares to speculate, expecting a quick profit on the first day. That did not happen, those participants withdrew, and there were not enough additional new participants to They did not participate in the IPO but that they would seek to buy through the exchange. It will probably take some time, “said V. Rūkas on Thursday on the” Delfi Tema “program.

He explained that an IPO is generally done at a slight discount in price compared to the fair value it should be.

“It is common for part of the IPO to make some profit in the first days. For example, there was the port of Tallinn, whose price rose several percent on the first day. Some participants expected a similar scenario, but it did not happen,” he said.

The biggest mistake

D. Misiūnas, the former head of Lietuvos Energija at the time, who participated in the fair, said ongoing trade indicates that demand was very close to supply during the IPO.

“This is also indicated by the price, which has not risen from the lowest point. Even the fact that it has been distributed less than expected indicates the same.” The fact that the EBRD (European Bank for Reconstruction and Development – Delfi) be the largest investor also shows the same thing: that he was a hedge investor with whom the relationship is old, from the distribution of bonds 3 years ago, “he said.

According to the interviewee, the information was manipulated during the IPO.

“The demand was commented, the managers were happy to share messages, they” leaked “information about the finished books. Saying A like this, but they never said B. When people asked what the demand was on social media, they deleted those posts with questions It was not very professional and transparent.

In addition, not only the demand is revealed, but also who the investors are. The EBRD declared itself, saying for the first day how much and what it bought. They bought 15 percent. emissions became 4%. shareholders, but you are not a new investor.

The impression is that there will be many investors on that list who have already invested in bonds. For the same purpose, it is a long-term return, not the promotion of capital markets, but simply a profit from a safe monopolistic investment. Because 70% of Ignitis’s business revenue comes from networks, another 15 percent. it comes from other regulated parties, ”said D. Misiūnas.

He noted that the big failure and mistake was damaging the reputation early on by starting to buy the shares through coercion without even announcing the IPO.

“The biggest problem was with the damaged reputation in the first days when the exclusion of ESO and Ignitis Production took place. From those communication incidents, the problems of this IPO began and, in the end, no one trusted him.

Now the mood in the local market is bad, negative and Latvians with Estonians, it can be said, did not participate at all in this process.

The main goal was to keep up with the elections. Both the finance minister and the director of the company had the ambition to register such an achievement. So a commitment was made. Obviously, the process was led by consultants, not by the company itself. Nobody, acting with prudence, would establish price ranges such that they end at the minimum point ”, considered D. Misiūnas.

As you know, during the IPO it was announced that the price per share should remain between 22.5 and 28 euros.

A step in the positive direction

Ignitis grupė has been criticized for not disclosing how many investors wanted to participate in the IPO (how many “books” were filled). M. Dubnikov, vice president of the Business Confederation, also agreed.

“It is criticized that the demand for shares was not disclosed to the extent that it exceeded the offer. Perhaps we will find the answer here. If demand and supply were closely related, then we see in the market that the price does not include the gunpowder to go up.

I was a huge skeptic that they managed to do that IPO in general because the time was basically too short. Time was an issue and it obviously affected the price.

The second thing is that the redemption of the former shareholders did not smell very good either, but I do not want to be completely skeptical and I must say that it is good that the issue was distributed in general and that we have a state company that can set an example. there are alternative sources of financing, ”he said.

According to the interviewee, this may prove useful in the future.

“The elections are taking place today, let’s wait for them to finish. But basically, there are more and more questions about what we will do next year. In 8 months, the state budget deficit reached 1.5 billion euros. It is very likely that We will surpass 2 billion by the end of the year Next year, it is not clear what the situation will be with the pandemic and what funds we will need.

We can borrow, and some politicians may think and look back that over $ 400 million has been raised here. euros. Maybe we should look at what we are not exploiting, “Dubnikov said.

For his part, V. Rūkas called in order not to ask “in a Lithuanian tone that everything is wrong again.”

“No, not bad. There are details that need to be corrected that were not good. Probably the biggest upset was the forced redemption of the little ones. It was a failure, it didn’t have to be done, but despite this” gap “, the company received more than $ 400 million euro for development and investment.

By taking a small step in the IPO, we made a big leap for the Lithuanian capital market, ”he said.

V. Rūkas added that he was extremely satisfied with the number of Lithuanian retail investors: almost 5,000.

“They made the decision to buy the shares. I know the number of minority shareholders in ESO and Ignitis Gamyba was slightly higher. But there were some ‘dead souls’ they had had since they were ninety-three years old, they had had them for 20 years, and some They didn’t even know they had them.

By the way, the pension funds participated together with the pension fund participants, not Invalda acquired shares, but the pension fund participants, which number more than 1 million. “All of them have now become indirect owners of the Ignitis group,” he said.

Too cheap?

D. Misiūnas said on the show that, in his assessment, the price of the IPO was too low.

“I sincerely believe that the shares were sold at too low a price because I myself worked for the company for 7 years and I know how much it is worth. It is also known that for 2 years you will earn 30%. more on what is already clear about existing investments and projects. Investors knew it, the company itself knew it and revealed it, but not to the public, but to an isolated circle of investors, “he said.

The EBITDA multiplier (earnings before interest, taxes, depreciation and amortization) set by the Ignitis Group IPO was 8.7.

As V. Rūkas and M. Dubnikov, EBITDA explained on the show, this is how much money is left at the end of the day.

“If there are 100 euros left, then if the value of the business is 800 euros, the EBITDA is 8. The multiplier shows how many years it takes for the money left on the table to make up the price paid,” Dubnikov said.

For his part, V. Rūkas taught that success or failure cannot be measured by the fact that someone once said a multiplier of 10 EBITDA.

“We cannot measure the goodness of a chicken by its ability to fly,” he concluded.

Mr. Dubnikov also said that Ignitis Group is currently rated good enough in terms of its performance. When asked if it was worth owning shares in this company, the interviewee answered the following:

“Everyone has their own personal answers. It depends on the type of dividend yield you want. Since the price is not the maximum, this performance will also be higher.

In general, the goals are short and long term. Some investors have long-term goals, they are the people who believe in green energy, believe in the energy outlook in general. There are still people who have the funds but cannot hire them for a tangible return, they can survive for a long time. For those who are pursuing short-term objectives, it is obvious that the floor price did not satisfy them. “

Read the interview with Darius Maikštėnas, CEO of Ignitis grupė, here.

Read here what an IPO is and why it’s called a decade deal.