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Krakatau Steel IPO Case May Discourage Investors
Jimmy Hitipeuw | Sabtu, 13 November 2010 | 02:53 WIB

A worker tightens a hot roll coil that is just produced by machine at PT Krakatau Steel, in Cilegon, Banten, on June 27, 2008

JAKARTA, KOMPAS.com - The polemics over the sale of PT Krakatau Steel (KRAS)’s shares through an initial public offering (IPO) could discourage foreign investors and have bad impact on the investment climate in the country. Following the IPO,  a controversy surfaced where many quarters were of the view that KRAS’ share price which was set at Rp850 percent was too low and might have benefited certain parties only while disadvantaging the state.
Moreover, the price of KRAS share proved to be sky-rocketing on the listing day. But on the other hand, foreign investors released their shares with KRAS creating speculations that they were inconvenient with the polemics. "Whether it was negative or positive, I am afraid they released their shares because they felt inconvenient. Or maybe because there has been escalating gains so that they released their shares," State Enterprise Minister Mustafa Abubakar said on Friday.

He said that the Rp850 price per share of KRAS which had sparked a public controversy was not low or high.  "The price was set after a research by the underwriters based on regulations in force," the minister said. The government’s move to sell 3.155 billion KRAS shares worth Rp2.6 trillion, or about 20 percent of the company’s  paid-up capital, through an Initial Public Offering (IPO), has however sparked a controversy as the government’s price of Rp850 per share was seen by many quarters as too low.

Of the total shares in the IPO,  35 percent were allocated for foreign investors while 65 percent others for local investors.   "It was not impossible for the shareholder to set the price at Rp950 per share but "we think Rp850 is the most optimum," he said.

Chairman of BUMN Watch, Naldy Nazar Haroen, said that based on data collected his organization,  the price set at Rp850 per share was illogical. During its roadshow, the number of investors who wanted to purchase the share with a price of between Rp1,150 and Rp1,200 per shares was bigger but why should the price be set lower at Rp850.
After all,  it was proven with the sky-rocketing of the share price from Rp850 per shares to Rp1,250 on the listing day and Rp1,340 on the second day on Thursday. Deputy Chairman of House of Representatives (DPR) Commission XI on financial affairs Achsanul Qosasi said the there was a deal in the setting of the IPO share price at Rp850 for the benefit of several parties.

"It has been predicted before and it is now proven that KS share prices have jumped up almost reaching 50 percent. Brokers and other players are successful in creating and applying a pricing image strategy through politicizing KRAS shares. I suspect that those who kicked a fuss in the media has nominee shares (listed on behalf of others) ," Achsanul said on Friday.
He said that the suspicion was proven with the sky-rocketing of the shares from Rp850 per shares to Rp1,250 on the listing day and Rp1,340 on the second day on Thursday. With regard to the suspicion over the presence of a `deal?, the secretary general of Golkar Party, Idrus Marham, said the party was ready to support an  investigation into the controversial initial public offering.

"Golkar has an interest in unveiling the entire case," he said.
There have been rumors that some members of parliament have received share allocations in the IPO. He said Golkar supported an  investigation into the case of share allocation to parliament members from various parties including the establishment of a special committee for it. Idrus said Golkar Party general chairman Aburizal Bakrie had already given a clear instruction with regard to the case.

In the meantime, Minister Mustafa Abubakar said his ministry would not disclose data about the sale of KRAS shares through its initial public offering (IPO). "I will not disclose the data because it is the authority of the Capital Market Supervisory Board - Financial Institution (Bapepam-LK)," he said.
He said that based on standing procedures, the Kras IPO’s data could only be disclosed by the State Audit Board (BPK) and Bapepam.  There has been increasing demand from the public for the disclosure of the buyers of Kras IPO shares.  "Seeing from the standing procedures, we have no authority to disclose the data," he said.

He said that all about it would be left to Bapepam. "The disclosure of the data is only possible if BPK already audited it but under the approval of the House of Representatives (DPR)," he added.
Based on records, the price of KRAS shares was closed at Rp1,270 each at the listing on Wednesday, or an increase of 49.41 percent from its IPO price at Rp850 per share. Transaction reached Rp1.994 trillion with a volume of 1.6 billion shares. Foreign purchase was recorded at Rp33.326 billion with a volume of 27.8 million shares.

With regard to the polemics, Minister Abubakar expressed concern that it would have a bad impact on the investment climate in the country, let alone, foreign investors hd also released their shares with KRAS. On the release of Kras shares by foreign investors, the minister hoped that it happened not because of the polemics. If it happened because of the polemics it could have a negative impact on investment at home.

He said that it could happen because investors could already obtain significant gains so that foreign investors decided to sell their shares. However,  President Director of the Indonesian Stock Exchange (BEI), Ito Warsito said most of the foreign investors make their investment for a long term gain in the capital market. It was seldom to happen that foreign investors invested their capital inflow for a short term period.

"Investment in the capital market is mostly oriented to mid and long term period," he said. Short-term investment had bigger chance of risks so that the possibility of hot money being invested in the capital market was  small.
He said that the pros and cons over KRAS’ share sale through the IPO, would discourage foreign investors if the polemics continued. "The purchase by foreign investors was questioned. It could cause trauma to them," he said.

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