MREIT speculation rampant that IPO price will drop
Today is the day that MREIT [MREIT 22.00 pre-IPO], the country’s fifth REIT, will announce its final price for the IPO’s offer period that will start on Tuesday of next week. So far, the prospectus and all of the material provided by MREIT and its sponsor, Megaworld [MEG 2.93 1.03%], have listed the maximum price as P22.00/share.
Of the four REITs that have gone through a pre-IPO pricing day, every one of them except for DDMP [DDMPR 1.80 1.12%] lowered their price from the amount indicated in the draft prospectus: AREIT [AREIT 38.10 0.91%]dropped from P30.05 to P27.00 (10.1% drop), Filinvest REIT [FILRT 7.26 0.14%] dropped from P8.30 to P7.00 (15.7% drop), and RL Commercial REIT [RCR 6.45 pre-IPO] dropped from P7.31 to P6.45 (11.8% drop). DDMPR held steady at P2.25 and is (so far) the only REIT stock to still be trading below its IPO offer price.
There’s been a lot of chatter from those in touch with brokers that the price might be dropping to the P16.00-18.00 level. Even if MEG were to adjust the price down to the top of that range, to P18.00/share, it would be the largest Pricing Day drop by a pretty significant margin.
Will the rumors of a steep drop turn out to be true? We’ll just have to wait and find out, but based on the past behavior of REITs on Pricing Day and maybe MEG’s interest in making MREIT’s projected yield more attractive to IPO investors, I think there’s a very good chance that we’ll see a decent discount by the end of the day.
At P22.00/share, MREIT’s projected yield for H2/21 and H1/22 is 4.10%. To match AREIT’s annualized yield (4.58%), MREIT would need to drop its price to about P19.70/share. To get up into the 6% yield range and compete against DDMPR (6.24% annualized yield) and FILRT (6.08% annualized yield), MREIT would need to drop its price all the way down to P15.00/share. That’s a 31.8% drop from its draft prospectus maximum price!
Perhaps MREIT only wants to dress its offer up to look comparable to RCR which just recently completed its offer period with a 5.70% projected yield, but even to do that it would still need to drop its price down to P15.80/share. What will MEG do? I don’t have any special information to tell me one way or the other, so I’m just going to sit back and watch just like everybody else!
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