The ongoing bull run has led to most recent initial public offers (IPOs) being oversubscribed many times over and sold in advance in the grey market at a premium, industry sources say.
Grey market deals, which are viewed as a sign of market prosperity by investors, are done on the expectation that the shares will outperform the IPO process when they list on the market.
According to an FII institutional sales division official, who did not like to reveal his identity, shares of Va Tech Wabag Ltd, a player in the water treatment industry, were sold at a huge premium of R330-350. The issue was oversubscribed 36.22 times at an issue price of R1,310.
Shares of Career Point Infosystems Ltd, a tutorial service provider, whose issue was oversubscribed 47.45 times overall and 101.93 times by HNIs, were offered at a premium of R130-135 per share. The price band of the issue was R295-310, the source said.
“The premium is calculated on the basis of domestic/international market conditions as well as sectoral/company perspectives,” a senior official from a renowned broking firm said while explaining the price difference. It is mostly brokers who act as middlemen in these grey market deals, as they have direct knowledge of clients.