Microfinance and Capital Markets - Council of Microfinance Equity ...

improving health and nutrition for poor Mexicans, while ACCION and the IFC will usetheir proceeds towards furthering their development objectives. 65Of the shares sold, 18 % were offered to the general public in Mexico, and 82% wereoffered to international, Qualified Institutional Buyers (the U.S. SEC has both an assettest and a qualitative test to ensure that investors are “financially sophisticated” in orderto purchase securities sold under Reg. 144a). Some 158 institutional buyers purchasedshares. Of these institutional buyers, 58% were hedge funds and 42% were traditionalfinancial institutions. The opening price of the stock was MXN 40.00, or $3.65. Theoffering opened at 12.8 times book value or at a market cap of $1.56 billion forCompartamos. The offering was oversubscribed thirteen times. As of August 13, 2007,the price was $5.4, which implies a premium of 48% over the issue price and a marketvaluation for Compartamos of $1.9 billion. 66 As of September 10, 2007, Compartamos’shares traded at 4.73 times book value and at a price-earnings multiple of 11.85times earnings.According to the detailed report on the Compartamos IPO by ACCION International,“The initial impetus behind the Compartamos IPO came from a normal process ofownership evolution. A sale of a portion of total shares held would allow the shareholdersto redeploy capital that was otherwise tied up.” The report goes on to explain that anotheradvantage of an IPO is that diversification of the ownership base prevents “majordisruptions in governance, management and strategic direction that abrupt ownershipcan bring.” 67Why was the Compartamos IPO so successful and what were the factors leading to itssuccess? According to the report by ACCION International, the following factors werein play: 68• Local financial market—The Mexican Bolsa (stock exchange) is well developedand liquid with a sound regulatory environment, 69 There had been few recentIPOs, and there had been a lack of banking IPOs. In fact, the acquisition byforeign banks of Mexican banks such as Banamex had taken a number ofimportant financial bank stocks off the Mexican Bolsa.• Compartamos’ structure—Compartamos had demonstrated sustainable growth,strong growth potential, superior management, socially valuable operations, goodclient relationships and strong governance.65 Rosenberg, “CGAP Reflections on the Compartamos Initial Public Offering,” 14-15.66 Burnhill, “Bringing Microfinance to Scale: Lessons from the Compartamos IPO,” slide 3.67 Rhyne and Guimon, “The Banco Compartamos Initial Public Offering,” 4-5.68 Ibid., 13.69 As a result of the Tequila Crisis, the regulatory environment for banks and the stock exchange hadimproved significantly.34