To provide some historical context, BBS originally aimed to raise 7.5 million euros through its listing, but only managed to get 3.5 million (which complicated matters). So, this medical bone sector isn’t exactly the hottest commodity in the eyes of retail investors.
However, I believe the company will raise a decent sum in this market environment, and an oversubscription is still possible. From there, they can conquer the world with their new “breakthrough” screw.
Bioretec’s listing canceled. 17.6.2021 18:15
“Bioretec’s Board of Directors decided to cancel the IPO because, according to Danske Bank A/S, Finnish Branch (the “Lead Manager”), the lead manager of the IPO, the IPO could not be carried out. The cancellation of the IPO is not related to reasons concerning Bioretec, its operations, or its financial position, but to the fact that a sufficient number of subscriptions was not achieved in the IPO. The IPO, including the over-allotment option, was oversubscribed, but not sufficiently to ensure that the aftermarket development of Bioretec’s share could have been assessed as being in the best interest of Bioretec and the subscribers.”
At the risk of being flagged, I have to comment that this whole thing smells a bit fishy. What kind of a situation is it where the offering’s target was met but it “wasn’t sufficiently oversubscribed” so the whole thing is canceled? Anyone who starts a game should be able to finish it… No share price jump due to multiple oversubscriptions, and “normal” market valuation isn’t good enough?
That’s right, I’m a little puzzled. I get the feeling they tried to make money with a 20-50% jump, and now that it looks like there won’t be “enough” oversubscription, they’re canceling. I’ll definitely remember this for next time.
This is probably due to many people oversubscribing significantly more than they actually intend to own in a hot market. Expectations nowadays are such that you only get crumbs from the amount of your subscription. Now, a slight (?) oversubscription means a risk of a selling wave when too many received shares are dumped on the market. In addition, many participate in these offerings only for the first trading day’s rise in the hope of quick profits. Sometimes it feels like IPOs have become pure speculation about the stock market debut.
At least the company has gained visibility, which will facilitate the next crowdfunding round in Springvest, or at least my assumption is that they will be scooping up funds from there again.
They acquired four million in February 2020, which is the amount they sought.
I don’t understand how this is essentially related to the company’s operations. Funding is raised as it is (even now, the target was reached), and the shares are then on the market. It shouldn’t be the company’s problem anymore what anyone does with those shares. Of course, a -20% drop on the first day of trading doesn’t look good, but if it’s such a big concern that it prevents a funding round, then perhaps it’s not worth coming to the stock market at all in the future either. Now, for once, those who wanted to subscribe in the offering would have received the amount they subscribed for, which has been exceptional lately.
I agree, for once I marked a larger quantity as I was interested. I didn’t expect it to go like this…
You said it right there. In an overheated market, where everyone is making oversubscriptions and initial surges like Netum and Merus, a slight oversubscription means a mispriced IPO in the short term. A reputational damage to the organizer and the lister.
This cancellation didn’t cause any reputational damage. In my opinion, there’s no “wrong” pricing. The price is what the market dictates. Now, the market apparently dictated no pricing at all. But for my part, this is now handled.
A strange solution considering there was oversubscription…
Could it be that in the middle of it all, they received an offer they couldn’t refuse? I.e., someone else’s proposal.
Well, there’s not much one can do about it, but perhaps they could have informed us in the listing prospectus what kind of oversubscription would be enough for the listing to proceed if the oversubscription wasn’t enough??
Absolutely ridiculous behavior, and I’ve lost all faith in the company’s management, unless they pull some rabbit out of a hat and the aforementioned scenario of some alternative financing method has occurred.
The company’s chairman of the board says it directly (the essential part from behind the paywall):
“Danske estimated that this would not be a favorable time, as there would be a risk of the share price falling,” replies Tomi Numminen, Chairman of Bioretec’s Board of Directors.
Doesn’t the oversubscription of the offering indicate interest in the company?
“That’s how we assessed it, but they (Danske) have their own view, which they will comment on themselves,” Numminen says.
Danske failed in pricing, and the company’s board approved an greedy subscription price?
So it refers to the bank fearing a repeat of Nightingale.
Peculiar. It reminds me of when Nordea blocked Smile’s IPO a few years back. There are rarely any winners in these situations. The quick-profit seekers who participated in the offering were saved from a loss, but on the other hand, it would be healthy to teach market participants that not every offering should be participated in with the hope of quick profits.
This is quite interesting, as the offering was, after all, fully subscribed. In Smile’s offering, the public offering was clearly undersubscribed, and the institutional offering also slightly. At that time, there were better grounds for canceling the offering, and yet it caused a stir.
Smile did find its way to the list by merging with VMP and changing its name to Eezy. I wonder if Bioretec will also find another way. Virala could be a gateway to the stock exchange if they get their own offering through. Actually, I would hope that they don’t succeed with those terms. In a way, it’s healthy that not all offerings go through. It indicates that the company and its pricing still matter, even if one might conclude otherwise from many offerings.
(I did not participate in this offering, although I have been seeking some additional returns for my portfolio’s cash from many others.)
Journalists will have work to thoroughly investigate the reasons for the cancellation. I myself was prepared with my fingers on the keyboard to mark more of the probable dip in the share price. That’s why I only made a moderate subscription to the IPO itself. After that, I would have calmly looked at least a year ahead to see what happens.
Was there a market maker who had to buy overpriced shares here?
Poor performance, yes, but at least small investors were saved from the share price drop.
Danske Bank would have acted as a stabilizer here. Apparently, there wasn’t the willingness to do so, after all, if it had started to crash badly. I’m also speculating that they don’t want to offer unpleasant experiences to the red-hot IPO market. As there will probably be enough newcomers in the fall as well.
A large number of IPO investors are always looking for quick profits and intend to sell their shares immediately after the IPO. If there are too many sellers compared to demand, the share price can crash badly. Nightingale is a good example of this.
Some years ago, the rule of thumb was that an IPO had to be 2-3x oversubscribed to avoid a crash in the aftermarket. Now there are even more quick-profit seekers, so the ratio may be higher.
A company lists only once, so it would usually be in the company’s interest to see the IPO through, even if demand remains insufficient. However, the bank does not want to cause distress to its clients due to a share price plummet, as they will soon be selling other IPOs to the same investors. For this reason, the bank often refuses to proceed with an IPO if demand is too weak.
Danske has experience with IPOs where stabilization has been needed, like Rovio. They probably foresaw that the price might halve soon after the offering. I myself have learned to be cautious with Danske’s IPOs because their pricing is usually opportunistic (e.g., Toivo, where the story seems to have carried it through, at least initially).