AB InBev IPO Pull-Out Likened to «Outrageous» Casino Racket
A local brokerage house in Hong Kong has called the recent Budweiser IPO pull-out and its subsequent effects an «outrageous» matter, urging the exchange to reform listing processes in full-page newspaper ads that likened the matter to a bad night at the casino.
Belgian parent company Anheuser Busch InBev's recent pulled-out of what was expected to be the largest IPO year-to-date ($9.8 billion) after citing market conditions amongst several factors for the retreat, significantly and unreasonably hit Hong Kong’s «mom and pop» investors, said Bright Smart Securities & Commodities Group, a renowned local brokerage house.
At 23%, retail investors make up a sizeable share of Hong Kong’s total trading last year which is much greater than in other major markets like New York or London and the segment very active in IPOs. They often take loans from brokers like Bright Smart to subscribe to IPOs, using expected shares in the future as collateral.
But a pull-out like Budweiser’s left investors without shares and having to «pay interest for no reason», Bright Smart said, in a series of full-page local newspaper ads.
«If another company shelves its IPO, that company should compensate for paid interest to investors to ensure fairness.»
Casino Un-royale
In the ads, Bright Smart likens the recent situation to gambling at a casino table in Macau playing a popular game called «sic bo», where one often tries to make a bet between two near 50/50 chance possibilities based on the sum three rolled dice.
«Imagine if all the investors in a casino in Macau betted on one side and it was known ahead of time that this would result in a sure loss for the house which then simply canceled all the bets,» the ad explained. «This is outrageous.»
A paper-based system continues to cause IPOs in Hong Kong to lag, requiring a settlement gap of five working days compared to less than one day in New York. The exchange said earlier this year that it was working on a paperless model to shorten this gap.
