GCash operator Mynt Inc. has set its initial public offering (IPO) price at P6.60 per share, 34 percent below its earlier ceiling of P10.
But does the lower price mean the company is now cheap?
Not necessarily. A stock’s price alone does not tell investors whether a company is inexpensive or a bargain.
When the Philippine Stock Exchange (PSE) approved Mynt’s IPO application in September, it allowed the company to offer about 8.03 billion primary and secondary common shares at a price of up to P10 each. The final price would only be determined after a process known as bookbuilding.
Bookbuilding allows a company and its underwriters to gauge investor demand before setting the IPO’s final price. Prospective investors indicate how many shares they may want to buy and the prices they are willing to pay.
This means P10 should not be treated as Mynt’s previous stock price. It was a maximum indicative price used before the final offer was set.
So does the P6.60 price mean investors did not want GCash shares?
Not necessarily. According to Mynt, its institutional bookbuilding process was oversubscribed multiple times, with participation from domestic and international institutional investors.
But strong demand doesn’t automatically make P6.60 a bargain. An IPO’s final price reflects factors such as valuation, investor demand, market conditions, and negotiations between the company and its underwriters.
So what is Mynt worth at P6.60?
This is where investors need to distinguish between the IPO size and the company’s overall value.
Mynt’s base offer consists of about 8.03 billion shares. At P6.60 each, the offer would generate about P53 billion. With an overallotment option of roughly 1.20 billion additional shares, the IPO could raise to about P60.9 billion, according to Mynt.
That P60.9 billion, however, is not Mynt’s total value. It represents the value of the shares being sold in the IPO.
PSE documents show that Mynt could have about 66.90 billion shares outstanding after the IPO. At P6.60 per share, that implies a post-IPO market capitalization of roughly P441.5 billion.
This is why a low share price does not necessarily mean a company is cheap.
Think of a P1,000 pizza. Cut it into 10 slices, and each slice is worth P100. Cut the same pizza into 100 slices, and each one is worth P10. The pizza itself hasn’t become cheaper-you have more, smaller pieces.
Stocks work much the same way. P6.60 tells investors the price of one share, but deciding whether Mynt is cheap or expensive requires looking at the company’s overall value and performance.
Is Mynt worth investing in?
The P6.60 offer price alone cannot answer that question. Investors should also look at Mynt’s earnings, growth prospects, and risks, including competition, regulation, cybersecurity, and consumer lending performance. They should also consider their own financial goals and risk tolerance.