TPK Holding, a primary supplier of touch panels used in Apple products, overwhelmed the nation’s stock market on Friday as its shares more than doubled their initial public offering (IPO) price on their first day of trading.
The company’s shares closed at NT$505 after their debut on the Taiwan Stock Exchange, which represented a 129.6 percent gain from its original offer price of NT$220, and made the company’s stock the third-most valuable in terms of price on the exchange on Friday, trailing only smartphone maker HTC and optical lens maker Largan Precision. HTC ended at NT$691 and Largan Precision closed at NT$607.
Driven mainly by the company’s solid relationship with Apple, as opposed to its technological expertise in glass-type projected capacitive touch panels, more than 580,000 investors managed to get a shot at the TPK shares through a public drawing mechanism ahead of the company’s IPO, but only 1.3 percent hit the jackpot and were able to take a stake in the firm.
TPK’s IPO has set many records on the local bourse: Its offer price was the highest in the past three years; the 129.6 percent rise on its first day was the biggest ever for a local IPO; NT$4.87 billion (US$159 million) in first-day share turnover was also the largest ever.
Moreover, TPK’s first-day surge gave the company a market value of NT$113.2 billion, a 55-fold increase from a capitalization of nearly NT$2 billion when the company was founded in 2003.
The TPK story is a typical example of investors going crazy for Apple products, and the growing popularity of the iPhone and iPad clearly offered TPK shares a lift. However, investors’ strong demand for TPK shares also underscores the market’s persistent hype for high-priced shares, which could turn out to be a mirage in the longer term.
At the end of the day, investors should bear in mind that when they buy shares in a company, they actually own a part in that company. As such, they should be most concerned about the earnings that company will generate in the years to come and the reality is that competition is intensifying in TPK’s line of business. Quality of earnings is also a point to note and some companies are offering strong earnings reports these days, but they are generated by cost-cutting and accounting techniques rather than through core business performance.
This is not to say that TPK does not have good growth momentum and market leadership — it does. And it is not to say that TPK does not stand out as a good stock among its peers — because it does. Still, increased competition will mean lower margins for all players and therefore will be a higher risk for investors and shareholders.
Another issue concerning an IPO is whether a stock’s rapid run-up on its debut — which it normally does — can be sustained after the first five sessions of trading after listing, the honeymoon phase, during which the stock exchange does not apply the 7 percent daily limit to the trading of new shares.
Moreover, people would like to know if TPK can stay above its IPO price in the longer term, duplicating the same, although limited, success that other high-priced stocks, such as MediaTek, HTC and Largan Precision, have enjoyed over the years since their IPOs.
Experience tells us that these stocks were able to stay firm or even climb higher after listing because their products or services are in high demand, rather than relying on the short-lived hype for high-priced shares among investors. The true test of a successful IPO cannot be known for some years.
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