RA Williams Distributors Limited successfully listed on the Junior Market of the Jamaica Stock Exchange (JSE) on Wednesday, but a wave of investors jumped ship as the company’s stock price dropped for two days straight.

The pharmaceutical distribution company listed under the ticker of RAWILL at $1.00 per share with a $2-billion valuation after raising $400 million in fresh equity capital. RA Williams is now the 48th security on the Junior Market and 105th company on the JSE. While there was fanfare at JSE headquarters over another successful listing, investors rushed to sell their shares in the 14-year-old company.

As a result, RAWILL halted down 25 per cent to $0.75 as 100,000 shares were traded at market open of 9 am. After the stock unhalted an hour later, the stock briefly traded up at $0.85, but eventually settled the day at $0.78, 22 per cent below its listing price. In the process, 2,917,020 shares worth $2,269,016.83 were traded over 105 transactions on the first day of trading.

This is the first time in over four years that a stock has closed below its listing price on the first day of trading after having its initial public offering (IPO). The only other time in that period where that occurred was with TransJamaican Highway Limited (TJH) which listed in the midst of the COVID-19 pandemic in March 2020. Otherwise, most IPO listings going back as far March 2017 have always seen the stock bounce upwards on the first day.

The second day of trading for RAWILL was no better as the stock halted down 12 minutes into trading to $0.66. The stock traded at an intraday high of $0.81 before settling off at $0.73, leaving it down 27 per cent since listing. As a result, 4,220,353 shares worth $3,059,840.27 were traded over 99 trades on Thursday. There were 43 orders remaining on the bid/buy side of the market worth $2,092,610.92, but 70 ask/sell orders worth $51.43 million at the end of trading.

This begs the question as to why investors rushed to sell their shares, especially with a 20 per cent loss after RAWILL’s listing. GK Capital Management Limited gave a $1.26 price target and a buy recommendation for the IPO while VM Wealth Management Limited gave a $1.28 price target and participate recommendation for the $1 IPO.

RA Williams sought $400 million from the market in the first IPO after Hurricane Beryl. However, the offer only garnered $420 million in subscriptions after three weeks. When the basis of allotment came out to detail how many shares would be allocated to investors, it was revealed that the general public would receive up to the first five million units guaranteed and any excess amounts above that point would receive a pro-rated allocation of 56.01 per cent. Thus, if someone invested $10 million, they’d receive 7,800,500 units and receive a $2,199,500 refund.

Now, to any layman, this might seem like a good deal as investors get sufficient volumes in the company just before it goes public. However, this is not necessarily a good thing as it indicates that there wasn’t excessive demand for the offer and meant that there would be a large supply of shares in the hands of a few investors than many investors. If there is more supply than demand, then the value of an asset is likely to go down barring any other factors.

In the case of Dolla Financial Services Limited’s IPO in May 2022, the $500 million offer closed after a week due to it garnering $4.762 billion in subscriptions from nearly 15,000 investors. Investors in the general public received the first 10,000 shares guaranteed and any excess balance was pro-rated by 2.6 per cent. Thus, a $1-million investment would result in an investor receiving 35,740 shares and receiving a refund of $964,260. Dolla’s stock price rallied from $1 on June 15, 2022, to a peak of $3.60 on June 21. This is an example of demand outstripping supply, which then translated into a sharp jump in Dolla’s stock price after listing.

Even One-on-One Educational Services Limited’s initial public offering garnered more than $2.8 billion in subscriptions relative to the $358.25 million offer size. One-on-One’s stock price rallied from $1 on September 1, 2022, to a peak of $2.50 on September 6. It should be noted that this was Sagicor Investments Jamaica Limited’s last IPO with its Einvest online platform before it was brought back online for RA Williams’ IPO. One-on-One’s IPO also had three other selling agents with JMMB Securities Limited’s clients putting in over $1 billion in subscriptions while Sagicor Investments Jamaica was the only broker involved in RA Williams’ IPO.

The public equity markets have seen a drop off in the number of offers over the past two years as higher interest rates took a bite in the economy. NCB Financial Group Limited’s additional public offering (APO) only garnered $2.48 billion or half of its desired target over nearly two months. Omni Industries Limited’s IPO earlier this year attracted $830 million in subscriptions compared to the $500 million offer size. There was only one IPO in 2023.

The JSE Index is down 4.97 per cent so far this year to 309,510.89 points with a market capitalisation of $1.64 trillion while the Junior Market Index is down 6.04 per cent to 3,615.96 points with a market cap of $143.56 billion. At the end of July, half of the 52 ordinary stocks were down on the Main Market while 28 of the 46 ordinary stocks were down on the Junior Market.

Of the 48 companies listed on the Junior Market now, 14 are trading below their IPO price with Elite Diagnostic Limited, CAC 2000 Limited, iCreate Limited, Edufocal Limited, and KLE Group Limited at least 59 per cent lower than listing price. Honey Bun (1982) Limited, Access Financial Services Limited, FosRich Company Limited, ISP Financial Services Limited, and Knutsford Express Limited being up more than 928 per cent. Regency Petroleum Company Limited and Omni Industries Limited are the only two stocks of the last five IPOs trading above listing price.