The IPO guide raises five flags ahead of Public Property Invest’s listing

April 29 is noted Public Property Invest on Oslo Børs. Prior to the listing, Affärsvärlden’s IPO guide has reviewed the company and raises five flags.

Questionable incentives

Questionable incentives is Affärsvärlden’s collective term for different types of risk of conflict of interest. A typical example is that the advisor or its employees own shares in the IPO company. It does not have to be a problem and can also be seen as an advantage, but there are also risks of conflicts of interest or the adviser overselling the share.

CEO Ilija Batlyan owns no shares in PPI while he is heavily invested in SBBwhich has a lot of business with PPI.

We raise a flag.

Complex offer

Wide rate ranges are the most common form of a complex offer. Other examples are very large elements of over-allotment options or situations where the number of shares or net debt is difficult to calculate.

The price range is wide and there is at the same time a relatively large over-allotment option. Perhaps most noteworthy is that the prospectus reserves the right to set the price below or above the specified price range.

We raise a flag.

Strange agreements

Important agreements are often reported in the IPO prospectus. Sometimes agreements appear as incomprehensible, strange or with an unclear connection to business operations.

PPI has agreed to buy a portfolio of properties from SBB. PPI pays with newly printed shares that are issued to SBB at the price of NOK 39.89 per share, while the subscription price in the IPO is between NOK 14.50 and 21. The interpretation that is closest to hand is that it is a kind of stealth discount on the properties that PPI buys.

We raise a flag.

Weak finances

Sometimes it is unclear how much money a company will make in the coming year. Sometimes it is painfully clear that there is a high risk that the company will need more money within a year.

PPI has large bond maturities in the near term that they currently do not have the coverage to resolve. The company estimates that it needs to bring in at least NOK 1,064 million in the listing in order to settle its nearest debt maturities.

As this situation is likely to be of help after the listing, we will stop at a clarification.

Insufficient information

It is a warning flag if you suspect or know that important information is missing from the prospectus. An example of this is that there is a lack of information about issue costs, conflicts of interest, underwriters, etc. This also includes significantly misleading information. Careless communication, for example many careless mistakes in a prospectus, can also be seen as insufficient information.

There is no information in the prospectus about anchor investors or how the company’s ownership will be after the listing.

We stop at a clarification.

Major deal ahead of the IPO

Acquisitions always involve risks while at the same time the management gets great opportunities to massage the profit figures in the short term. When companies make large corporate deals close to listing, it is a warning flag. Here we also capture major news during the subscription period.

PPI has agreed to acquire a portfolio from SBB for NOK 1.6 billion. It is a very large deal for PPI, whose implied market capitalization is NOK 3.5 billion.

We raise a flag.

CV with chumps

For investors, it is relevant to know whether key persons have a history of, for example, bankruptcies, disputes, prosecutions or major business failures. One (gentle) walk is no walk, but two times can be a gong.

CEO Ilija Batljan has two lumps on his CV, SBB and Rikshem.

We raise a flag.

Here you will find Public Property Invest’s company page on the IPO guide