Sunday, September 9, 2012

How to read an IPO balloting ratio table

In several of my posts on the recent IPOs, I listed the IPO balloting ratio table. Some people might not understand what the table actually means. I will share here on what each column actually means.

Using the recent Ascendas hospitality trust as an example,

Range of stapled securities/shares applied per ('000)
The actual balloting occurs in "bands". For example, if you applied for 15 lots. You will be balloting against other investors who applied between 10 to 19 lots.

Balloting ratio
This refers to the chance of getting successful allocation. For example, for the 10 to 19 lots band, the chances of successful allocation is 66% (33/50).

No. of stapled securities/shares allocated per successful applicant
This refers to how many shares are allocated if one is successful. Being allocated shares/units does not mean you are allocated the full amount which you applied for. In the example above , if you are the 66% in the 10 to 19 lots band, you will be allocated 3 lots only.

Percentage of total number of stapled securities/shares available under the public offer
The number here is of little significance to the individual investors. It shows the percentage of total units allocated across each of the bands. It provides a general view on how the allocation is like across the different bands. In the example above, we can see more than one quarter of the total units are taken up by the 100 to 199 lots band.

Number of successful applicants
This refers to the number of successful applicants on the same band. If you use this number with the balloting ratio, you can figure out how many investors balloted for the band.


How the above information can help you.
1) There is no need to apply or too many units.
The typical banding is quite consistent among the different IPOs. Instead of applying for a 15 lots in an IPO, you can consider applying for 10 or 11 lots since you will still fall into the same band.

2) Applying for more than what you actually intend to keep
In a "hot" IPO, you will only be allocated a small percentage of what you applied for as seen in the example above. Since the application fee is flat, you can want to apply for more if you have the additional cash on hand.

However, do note that this can go against you if the response for the IPO turns out to be poor. For example, in the Genting perpetual security IPO, the allocation ratios were as follows:
If you had applied for 10 lots thinking that you will only be allocated 3-5 lots, you will be surprised to be allocated a full 10 lots in this IPO.

With the understanding of how IPO allocation works, investors can better decide on the number of shares they would like to apply in future IPOs.


Anonymous said...

Why is the denominator of the balloting ratio at 50 for all ranges of offered shares?

Mad Stranger said...

Hi Anonymous,
The 50 is not fixed. It depends on how they want to express it as a ratio. One may use
a 30:50, another may want to use a 60:100 to mean the same thing.