Who are those selling Astro shares?

Friday October 26, 2012

Friday Reflections - By B.K. Sidhu

ASTRO Malaysia Holdings Bhd's paltry performance since its debut on the market last Friday raises one very pertinent question Who is selling Astro shares in the market?

The question is pertinent because it boggles the mind as to why anyone would be dumping the stock so early. Many investors who buy into companies linked to tycoon Ananda Krishnan have tended to be long-term investors looking for the promised dividend yield and capital appreciation, which have generally been decent.

Since its listing, Astro shares have not gone above its IPO price, save for a few moments on the day it was listed.

The stock opened at RM3.03, shot to RM3.11 and for a while, that brought cheer to many people but that joy ended as soon as it started.

The shares succumbed to selling pressure and ended its first day flat at RM3.

Alhough it has recovered some ground from its rock bottom of RM2.70, it is still pretty much “underwater,” closing at RM2.86 yesterday.

So, who's selling, because anyone who bought the shares at the IPO price of RM3 per share, would be selling at a loss.

The market is rife with rumours about this.

Did the cornerstones, other institutional investors, Miti-approved bumiputra investors, Astro employees or the retail investors sell the shares?

Note that none of them got their shares at a discount all the 22 cornerstone and Miti investors paid RM3 per share, just like the retail investors.

One unsubstantiated theory was that the selling was being done by those who got the Astro shares at a discount or worse, for free! That theory is far-fetched, as it wasn't disclosed in the prospectus which parties were getting shares at a discount or for free. But this if this is true, then some explanation is needed.

Another rumour is that the selling is by some institutions who had bought the shares only with the interest of dumping them on listing day. In other words, they weren't interested in holding the stock.

There's also the theory that the selling is by those who used margin financing the buy the shares. After the price dipped below IPO, these investors weren't able or did not want to fork out the amount required to top up their margin accounts. So, they preferred to sell the shares and just take the one-time hit.

Yet another theory is that the major shareholders are selling, considering that their cost is below the IPO price, so they will still pocket the profits.

That possibility though is highly unlikely. Both Ananda and Khazanah Nasional Bhd had already sold a lot of their shares in the IPO exercise. So why jeopardise the performance of an IPO that they already made tons of money from? Khazanah has a lock-in period for the shares.

Despite the selling or maybe because of it, it is noteworthy that those driving Astro's business are taking the opportunity to buy some of the stock on the cheap. These include Astro's two top bosses including its CEO and COO - Datuk Datuk Rohana Rozhan and Henry Tan respectively.

Whatever the case, it is possible that the mystery of the sale will be revealed soon when shareholder changes are posted on Bursa Malaysia. Then again, there is no assurance of that because only substantial shareholder changes will be recorded.

The seller may be holding less than 5% and if that is the case, it will remain a mystery as to who sold the shares and whether the party will continue to do so.