Tuesday, December 15, 2009

DSCSOL- Were investors not aware of the Bonus Issue?

DSC Solutions Berhad ('DSCSOL') is involved in the provision of AIDC solutions, software & engineering services. AIDC stands for Automatic Identification & Data Collection. AIDC allows companies to improve their business processes by changing from a manual to automatic data collection systems. This will enable the production of faster & more accurate reports- aiding management in its decision-making.

For its listing purposes on the ACE Market of our exchange, DSCSOL made a Public Issue of 12.578 million shares at an issue price of RM0.50. After the IPO (but before its listing), it carried out a Bonus Issue of 1-for-1. This effectively reduced its IPO price from RM0.50 to RM0.25. The stock was listed on Dec 9.

From the 15-minute chart below, we can see that the share price jumped on the first day of listing and thereafter it steadily sold down. I hope the reason for the bullish action on the first day of trading was not due to investors' misreading the Prospectus or that they were not aware of the Bonus Issue. If so, it could lead to a mispricing of the stock. The making of a Bonus Issue after the IPO closure & before the listing of the stock on the exchange is a practice that should be discouraged.

Chart: DSCSOL's 15-min chart as at Dec 15, 2009_9.24am (Source: Quickcharts)


Ooi Beng Hooi said...

Don't see the point of giving bonus issue during IPO listing...

Maybe just a gimmick to attract investors...

SC/ Bursa should disallow such no value added practice to avoid confusion

Alex Lu said...

Hi Ooi,

I agree that there is really no value added to this exercise. It only serves to confuse investors.