The share price of Grand Twins International, a manufacturer for U.S. athletic apparel brands, on Tuesday sank for the fourth straight day since it was listed on the bourse last week, signaling that its initial listing price was too high, industry analysts said.
“The pricing of the IPO [initial public offering] was too high and too aggressive,” said Thomas Hugger, CEO and manager of Asia Frontier Capital, a Hong Kong-based fund management firm.
“It’s a sign that the stock was not fully priced out. Some of the investors that bought into it now want to get out.”
Mr. Hugger said he had met earlier this year with Grand Twins officials in Hong Kong who were trying to entice investors and advised them that the initial listing price was too high.
“We frankly told them it was too high compared to other textile companies in the region,” Mr. Hugger said. “We told them, ‘We don’t need to invest in Cambodia because it’s Cambodia. We can invest elsewhere where we see potential.’”
When Grand Twins listed on June 16, its base price was 9,700 riel, or about $2.40, with an initial 2,700 shares trading at a total value of about $6,469. At closing Tuesday, the price was 8,780 riel, or about $2.19, with 14,000 shares traded.
Grand Twins is the first private firm to list on the Cambodian Securities Exchange (CSX) since the bourse opened in 2012, and the second company to list. The first was the state-owned Phnom Penh Water Supply Authority.
Douglas Clayton, founder and CEO of Leopard Capital, a leading private equity firm in the Asian market, said investors have not shown much confidence in Grand Twins.
“There is too much uncertainty over the company’s future earnings to trade at that earnings multiple,” Mr. Clayton said, referring to the price to earnings ratio.
Grand Twins’ share price dropped by between $0.14 and $0.11 each day since it opened, increasing only once, on June 17, by about $0.10.
Lamun Soleil, deputy director of the CSX’s market operations department, said there was no clear explanation for the drops.
“It’s difficult to answer because it is a mechanism of the market,” he said.