The starting price for Vietcombank’s shares has been defined at VND100,000 per share. With such a price, the total market value of Vietcombank would be VND150tril (1.5bil shares). Meanwhile, by the end of 2006, the bank had had the total capital of VND11tril only.

The figure VND150tril is equivalent to 75% of total assets of the bank by the end of the third quarter of 2007, a very high level (as for the banks in the world, the market value is just equivalent to 20% of total assets on average).

Some analysts believe that the price of Vietcombank’s shares may reach VND180tril. If so, the total market value of Vietcombank would be VND270tril, 1.35 times as much as the total assets, or equal to 23.7% of Vietnam’s GDP in 2007.

Nevertheless, these are just the figures which have been calculated based on the announced starting price and expected price by investors. Other analysts, considering the current situation of the market, said that Vietcombank’s share prices would not be high for many reasons.

First, if Vietcombank had made the IPO first, and then chosen strategic shareholders, its share prices would have been as high as mentioned above. It was because investors did not know that strategic investors accepted the prices which were just 4-6 times higher than the face value. Now investors know the actual value of the bank already, and they would not pay a high price for the bank’s shares.

Second, Vietcombank’s IPO is expected to be the biggest IPO so far, and in order to buy all the available 75mil shares (to be reserved for domestic investors), investors have to arrange a huge volume of cash. Suggested that investors can buy shares at VND100,000/share, they would have to have VND7,500bil, which is equal to the transaction value of the latest ½ month. In current circumstances, when the central bank tightens the loaning to securities investment, investors would have not much money to inject in Vietcombank’s shares.

Third, there are not many long term investors on the market. Most investors are short term investors, who make investments with borrowed money and try to make profit from short term trading deals. As Vietcombank’s shares are not thought to increase after the IPO to the levels high enough to bring profit the short term investors, they would not buy Vietcombank’s shares in large quantity.

Which will happen after the IPO?

In general, the price of shares would increase by 15% right after the IPO. The scenario occurred with the Chinese Foreign Trade Bank and Industrial and Commercial Bank.

In most of cases, enterprises want their shares to go up in value after IPO. However, analysts said that there is the low possibility that Vietcombank’s share prices would increase considerably after the IPO. In fact, Bao Viet insurer’s share prices have not increased in the last few months after its IPO, and analysts believe that the same scenario would occur with Vietcombank.

Which strategic shareholders are available for Vietcombank?

Vietcombank wants to shake hands with famous groups like Nomura or GE Capital. However, the negotiations between Vietcombank and the foreign strategic partners have not been wrapped up yet as the foreign partners pay the levels far below the ones expected by the seller.

A question has been raised that if the foreign partners would accept the high prices after the IPO, when the average auctioned price is defined. And the possible answer is ‘no’.

It is possible that Vietcombank would call on the foreign partners to come back to negotiations and ask them to accept the auctioned prices. In return for this, Vietcombank may promise to reconsider the value of the brand name and technical assistance to be required from the partners.

By doing so, Vietcombank will score two goals: it will successfully get suitable strategic shareholders and sell shares at high prices as well.

In the worse scenario, Vietcombank will not be able to choose the desired strategic shareholders, having to accept less powerful strategic partners, which cannot help turn Vietcombank into the leading bank in the region as the bank expects.

Analysts have also warned that Vietcombank’s IPO may kick start a new wave of share price decreases instead of share price increases as people think.

Source: VietnamNet.