“We’re also planning on extending it, later down the road, to private equity placements as well,” says S.J. Wong, CEO of both e2-Capital and OpenIBN Technology Holdings.
e2-Capital Securities is one of 11 smaller-sized Hong Kong brokers that have already signed up for the platform. While Wong says that the intention at first is to target brokers that "don’t have any primary IPO product", e2-Capital Securities is committed to put all of the deals it has through OpenIBN.
e2-Capital Securities is currently co-managing a Japanese IPO and Wong says he would like to use the OpenIBN system to offer its block of shares to member institutions and private, high net worth investors in Hong Kong. “That will probably be the first issue that’s put online.”
The IPO in question is a venture fund operated by Japanese holding company Softbank Investments that will be listed on the Tokyo Stock Exchange “sometime in the next two weeks,” says Wong.
Deputy CEO Jenny Tam says that it’s not yet definite that e2 Capital’s block of shares in the Softbank deal will be placed through the system, as it is still waiting for the final approval of global coordinator and lead manager for the deal, Daiwa Securities.
“Initially all the deals will come from e2 Capital, but eventually we hope that other placing agents will move onto the platform. e2 Capital is putting all its deals online and some of those will be domestic and others international,” she says.
Not like MTR issue
Wong says the platform is very different from the e-IPO process which is operated by the Stock Exchange of Hong Kong, and recently came to prominence during the IPO of the MTR in Hong Kong. OpenIBN targets the private placement process, which accounts for 90% of a typical offering. This, says Wong, is the process that he aims to improve in terms of efficiency and transparency.
“The placing agent that has the shares at this present moment can’t offer them to investors. OpenIBN allows the placing agent to specify a ratio of shares to be allocated to other institutions, or direct to investors,” he says. They can also, for example, push half of their block of shares through the OpenIBN systems and deal with the other half using more traditional means.
As for concerns that allowing retail investors access to what has traditionally been a closed-door institution might lead to increased market unpredictability, Wong says that the opposite is true. “It’s open to both the individual investors and the institutional investors, so institutions can also register as members to buy. With the platform, in fact, [a placing agent] can have a better control as to how much they want to place to institutions and how much they want to place through a broker.”
Commissions are collected only from the placing agent. If they put $100 million through the system a commission would typically be around 0.35%, says Wong. The brokers and investors don’t need to pay for the OpenIBN, although brokers will still charge their customers normal commission. The placing agents themselves still retain their higher fees on the placement, in Hong Kong, typically 2% to 2.5%.
OpenIBN Technology Holdings, the developer of the technology behind the platform, is 100% owned by e2-Capital Holdings. OpenIBN Technology Holdings licenses the technology to subsidiary OpenIBN (Greater China), which as the name suggests operates the platform in the Greater China region.
In order to encourage participation in the system among brokers and placing agents, those who become members between now and June 2001 will be allocated share options in OpenIBN (Greater China), depending on the volume of business they transact through the platform. Eventually up to 49.9% of the company will be allocated in this manner, with OpenIBN Technology Holdings maintaining a 50.1% controlling interest.
