Ginko Oil Exploration Ltd. today cancelled its IPO on the Tel Aviv Stock Exchange (TASE) after failing to meet the minimum public holding.
Ginko previously tried to go public in August 2004, and raise NIS 150 million for oil exploration in the Dead Sea area. That attempted IPO was a dismal failure, which the company attributed in part to a wave of terrorist attacks that deterred foreign investors on whom the company was depending.
This time, Ginko tried to raise NIS 34 million through the sale of 85 million units of shares and warrants. Demand totaled just NIS 29.9 million. The underwriters, including Meitav Issuing and Finance Ltd. and Rosario Underwriting Services AS Ltd., undertook to order NIS 9 million worth of units if public demand did not meet the threshold, which should have been enough to close the offering.
However, orders from the public totaled only NIS 5.2 million at the minimum price of NIS 400 per unit, and the other NIS 24.7 million were ordered at NIS 570 per unit. This meant that orders in the public tender totaled only 56,000 units. The value of the underwriters' commitment at the minimum price amounted to 22,500 units, which brought the total number of orders received to 78,500 - 6,500 fewer than Ginko wanted to sell. In financial terms, the shortfall was NIS 2.6 million to close the offering.
Had the offering been held with a different structure, at a uniform price per unit, for example, demand would have totaled NIS 29 million, amounting to 72,500 units. If the underwriters' commitments are added, Ginko would have sold the units offered in the tender, and the company would be listed for trading.
In view of the results, the investors' orders were cancelled. Ginko will also refund a group of investors to whom it allotted in a private placement unlisted shares at a 15% discount, as the placement was subject to success of the IPO.
Ginko's assets include two exclusive licenses in the Dead Sea area - Luba and Shahar, and an equal holding with Zerah Oil and Gas Explorations LP (TASE: ZRAH) in the Orly license in the Dead Sea area, and 50% of the offshore Gulliver license. Ginko is also the general partner in Zerah. Ginko sought to issue 22% of the company at a value of NIS 88 million.
Ginko is the second oil and gas exploration company to try to go public in the form of a limited company rather than a limited partnership. Alon Natural Gas Exploration Ltd. (TASE: ALGS) held a particularly embarrassing IPO early this year, receiving orders worth only NIS 280,000. That offering nevertheless went ahead, and the company, which owns 3.8% of the Tamar lease, was listed for trading.
Several oil and gas limited partnerships have held offerings on the TASE, including Modiin Energy LP (TASE:MDIN.L), and Globe Exploration LP (TASE: GLEX.L). However, the more recent IPO by Israel Opportunity Energy Sources LP (TASE: ISOP.L) made a loss for its investors, despite being oversubscribed.
It is possible that this loss left investors with a bad taste, and led to the low demand in the Ginko offering, as investors in the sector opted not to take risks with another offering.
Published by Globes [online], Israel business news - www.globes-online.com - on August 18, 2010
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