Head of listed company PR Foods Indrek Kasela said that the IPO of Port of Tallinn ended up as one of the costliest public offerings in history.
“More than €7 million to investment bankers and lawyers is not proportional for such a transaction. Every Estonian paid roughly five euros for the process,” Kasela wrote on social media.
Kasela finds that if something that is worth €100 is sold for €80, oversubscription is to be expected. He compared Port of Tallinn to Elering the cost of listing of which was much more modest and saving on capital expenses stretched into tens of millions that went straight into the pockets of all electricity consumers.
“An exemplary transaction in every sense,” Kasela said, pointing to the transmission network company’s €225-million IPO from early May.
Kasela is also critical of Port of Tallinn IPO share distribution. “Money stayed in the family – foreign funds were preferred as they stood closest to the bankers. More should have been made available to retail investors in the interests of liquidity. Institutions follow a buy and hold long-term strategy, and that includes Estonian pension funds. Where is the gain when an Estonian retail investor must also foot the fund management bill instead of being allowed to buy Port of Tallinn directly?” Kasela asked.
He said that the positive aspect of listing the state-owned company is improved corporate governance.
“In 2018, when Estonia has produced at least six companies worth €1 billion and a dozen firms worth several hundred million, we should not praise politicians for their courage (they are not courageous – hence the price of Port of Tallinn); rather, it is our justified expectation that we do not forget the 1990s when the state was truly bold and allowed private enterprise to prosper,” Kasela said.
“Today, we are moving in the opposite direction – national energy giant Eesti Energia is buying out private competitors, RMK has been let loose in our woods, excise duties are cutting off the economy’s air supply etc. While the greed of investors is limitless, the future of the Tallinn exchange is not converting state companies into cash; it is a meeting place of companies’ need for capital and investors’ desire to invest,” he added.
Partner at investment consultants Superia Corporate Finance, Henrik Igasta, disagrees.
Igasta said that the total cost Kasela points to is similar to international precedents, considering the goals, structure, and complexity of the port’s IPO.
He added that Kasela’s example of a €100 thing being sold for €80 is unclear. “As the transaction closed with a hefty oversubscription and share distribution followed the goal of allowing the price to go up on the immediate aftermarket, we can expect the share to trade up,” Igasta said.