Is FGVH's first day premium a precursor for IHH?

FGVH opened at RM5.39 (premium of RM0.84) and closed at RM5.30 to register a premium of RM0.75 on its first day of trading - quite a cool gain for those who are awarded the shares.
Now that FGVH's public trading is already on the way, can its opening price performance be a benchmark for IHH's IPO? You bet!

Why? Basically, both have the same ingredient for success.

1. Issued by government related organization, hence it has the same parties who probably would have supported the issues - EPF and other government agencies.
2. Has hired a price stability manager - FGVH (Maybank), IHH (CIMB).
3. Cornerstone investors where they are not allowed to sell until 6 months after opened for trading.
4. Small public issuance, hence you can probably expect it having a small float especially for the first 6 months where the cornerstones are not selling.

Just look at the above chart, FGVH's offering in fact has more public and institutional investors (26.9%) as compared to IHH which has 10.52%. How difficult it is to perform the same for IHH, then? In terms of value for small shareholders, IHH is much smaller - RM2.41 billion against FGVH's RM4.46 billion.

I do not believe that trading for the first 4 to 6 months would be based on fundamentals. The trading would be much more relying on the small shareholders involvement (those who are awarded the shares and may sell as they are not really investors anyway. They are much more short term holders who were awarded the shares. In shares, over the short term, it is very much dependent on "demand and supply". Some institutional funds can act as buyer to create the demand and most importantly, there are shortage of suppliers - which is the ideal situation for good IPO opening price.

Notice the large tranche in the MITI tranche. The very notion that it is created where this tranche is only for larger Bumiputera companies or richer individuals makes you think that the portion is created for short term holders. The requirement for the MITI tranches is that companies must prove that they have at least RM10 million assets or for individuals RM3 million in assets. Some of them may be on financing in picking up the shares. It is however easier to monitor individuals or companies who own blocks in 250,000 units multiples rather than smaller sum.

What the stability managers and certain portion of the funds need to do are to trash out these holders who do not have the holding power so that it would make it much easier to support the share price later on.

This issuance is meant to be successful for the SHORT TERM. When the floodgate is opened for the cornerstones to sell after the six months, it may be different though. Fundamentals checks in after this.

As in comparison between FGVH, IHH against the failure of Facebook's IPO in getting a premium, there should not be any comparison besides all of them being sizable offerings for the year. To a certain extent, in the short term FGVH and IHH's IPO pricing can be controlled as the percentage of sellers are not going to be plenty. On the other hand, many Facebook's shareholders were waiting to sell as they have been holding onto the stocks for a long time.