S.I.P.

For a stock-market investor, few things are as frustrating as being unable to get shares of a really hot IPO. Especially if everyone else you know was able to buy and you are the only one unable to participate in the IPO’s meteoric rise.

Unfortunately, given the fact that brokers are not really legally obligated to give shares to small, walk-in clients, a lot of people are left on the sidelines when it comes to IPOs.

Take the ongoing IPO of independent petroleum producer Phoenix Petroleum for example. Lots of people want it but given the fact that each brokerage house only got about 54,000 shares, only the top clients of each broker received any shares at all.

This frustrated, and in some cases, angered a lot of people as they felt they were being denied access to one of the hotter IPOs of the year. However, as I mentioned above, it is completely up to each broker how they will allocate the IPO shares given them so they really can’t be blamed if they give it only to their biggest accounts. Fortunately for the small investor, there is a way through which they can get a small number of shares.

Pioneered by the PSE and SEC years ago, the Small Investor Program, or S.I.P., was created to give small investors an avenue through which they can subscribe to IPOs. Simply put, underwriters of IPOs are tasked to set aside a significant number of shares for small investors.

This means that even if you have only a small amount of money or are not a regular market player, you can get shares of hot IPOs.

So how does the S.I.P. work? First, you have to discover who the underwriter or underwriters of an IPO are. The best people to ask would either be the PSE or your broker. Then, you have to go to the underwriter’s office and fill out a subscription form for the IPO.

Now, it has to be reiterated that this is a system for small investors. By this I mean that the total value of the shares given to individuals rarely exceeds P20,000.

Going back to our example of Phoenix Petroleum, individuals who went to Phoenix’s underwriter (in this case, BDO Capital) were allocated 2,000 shares each. Given that the issue was priced at 9.80 per share, that meant an investment of about P19,600 each person.

Not much, I admit, but given the heavy demand for the shares, it is very likely that the issue will gain over 20 percent once it gets listed in two weeks.

Of course, by the time this piece comes out, the offer period for Phoenix would pretty much be over so this information might seem moot and academic.

However, on July 2, 2007, the IPO process for media giant GMA-7 begins and that is definitely one of the most anticipated IPOs for the year. So, if you would like to get shares of GMA, here is what you should do. First, if you already have a broker, signify your interest as early as you can. Even though there is yet no final price for the offer, let your broker know that you would like some shares and, if you can, how much money you would like to place—i.e. P10,000? P50,000?

Second, visit the PSE website at http://www.pse.com.ph and find out who the underwriters are. (OK, I checked and the underwriters are DeutscheBank and ATR-KimEng Capital Partners.) Third, get in touch with either of the two institutions and inquire about the S.I.P. Next, fill up the forms and deposit a check for the number of shares you would like to subscribe to.

Please bear in mind that the fact that they received your payment is no guarantee that you will receive the number of shares you like. The underwriter will decide how many shares to give you and return any excess funds to you. After that, find a broker who will sell your shares once the company is listed. This step is very important since you will be unable to sell your shares on listing date unless you have told the underwriter who your broker will be.

With all of that said, here are a couple of things to keep in mind.

First, the number of shares you will get will be relatively small. As mentioned above, do not expect to get more than P20,000 worth of shares. (If you get more, great; just don’t go there expecting to get P100,000 worth of shares.)

Second, most underwriters will require the personal appearance of the person applying for the shares as well as several i.d’s. So, you cannot just go to the underwriter and say you are applying for several people. Third, the shares are finite in supply so if you apply late, there is a very good chance that the underwriter would have allocated all the shares already. Do not go on the last day and expect to get any shares. (Especially for an offer this highly anticipated.)

Lastly, and most importantly, do not assume that the GMA offer is a 100 percent sure thing. Granted, all indications are that it will do well but just because things seem to be going well is no guarantee that the offer will make money. As always, ask around and get qualified opinions before you place your money in any form of investment.

Malaya A. Laraya is a registered financial planner and a member of RFPI. Along with preparing financial plans for clients, he is also very active in conducting seminars aimed at educating college students about personal financial planning. Comments and questions can be sent to laraya910@yahoo.com.

Join the Eighth RFP Program (September 29-November 17, 2007). Visit www.rfp-philippines.com or inquire at info@rfp-philippines.com/Tel. No. 6342204.

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