Union Bank’s Rs. 375 million initial public offering (IPO) was oversubscribed 300 times on the opening day yesterday (24), being the highest oversubscription rate for an IPO in the country’s capital market history, sources close to the offer said.
The announcement that the IPO was oversubscribed, as expected by the market, was relayed to the Colombo Stock Exchange within the first hour after subscription lists were opened yesterday.
According to market sources, a deposit of Rs 11 million allowed any prospective investor to apply for the entire Rs. 375 million IPO through a bank guarantee.
Union Bank offered 15 million shares at Rs. 25 each in three categories of 1.5 million for employees, 2.25 million for customers that have maintained accounts for a minimum of 6 months as at 31 January 2011 and 11.25 million shares for other investors.
Due to the Rs 11 million cash deposit bank guarantees, the demand for Union Bank’s shares have dramatically increased ,which resulted in it being oversubscribed by around 300 times, a source close to the offer told The Island Financial Review.
The IPO comes in the wake of a Rights Issue and a private placement that attracted investor interest. The Rights Issue of December 2010 had 10 million shares issued to existing shareholders which was oversubscribed by four times.
Subsequently, 12.5 million shares were issued via a unique tender and book building process with another 7.5 million shares being allotted to a foreign institutional cornerstone investor resulting in a total of 20 million shares being issued through a private placement which was oversubscribed thrice, reaching record levels of investor confidence.
source - www.island.lk
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