Yehey IPO: Stock rises 170% on first trading day

James Ryan Jonas

Investors of financial holdings firm Vantage Equities (PSE stock code: V) who received shares of Yehey! Corporation as property dividends in 2007 have a genuine reason to rejoice, now that shares of Yehey! Corp. are being traded on the Philippine Stock Exchange.

Yesterday, October 18, digital marketing company YEHEY debuted on the PSE and its stock price registered a 170% increase from its initial listing price of P1.00 to close at P2.70.

PSE’s Second Board

Yehey! listed 278 million common shares on the bourse’s second board, under the Services sector and Information Technology sub-sector. The second board is for companies with smaller capitalization but with high growth potential. In contrast, the PSE’s first board is for higher-cap companies with authorized capital stock of at least P400 million and a track record of at least three years of profitable operations.

Recently, the PSE announced it is planning to merge the first and second boards into one Main Board where required capitalization is at least P500 million. Rules are still being finalized, but affected companies will be given ample time by the PSE to abide by the new policies.

Listing by Way of Introduction

Technically, Yehey! Corp. did not conduct an IPO or Initial Public Offering. What they did instead was listed their shares in the PSE by “way of introduction” — without the need for the usual initial public offering.

Listing by way of introduction is a method of listing on the PSE without raising funds for the issuer. Yehey! was allowed listing through introduction after meeting a condition set by the PSE wherein “the securities of an unlisted issuer are distributed by way of property dividend by a listed issuer to shareholders of that listed issuer.”

On April 25, 2007, Yehey’s parent company Vantage Equities, Inc. (formerly “iVantage Corporation”) distributed to its shareholders a total of 84.79 million YEHEY common shares as property dividends. The Property Dividend resulted in the distribution to Vantage shareholders of one (1) YEHEY share for every twenty (20) common shares of Vantage held as of record date.

Property Dividends

After the distribution of property dividends, Vantage reduced its equity ownership on Yehey! Corp. from 98.85% to 68.35%. Vantage shareholders who received the property dividends then owned 30.5% of Yehey! while minority shareholders retained 1.15% of the company.

Yehey’s listing on the PSE thus gives Vantage stockholders a way to cash out the shares they received as property dividends. Majority shareholders who own at least 10% of Yehey! Corp., on the other hand, are bound by the 365-day lock-up rule that prevents them from selling their shares until 1 year after listing date.

Yehey! today

Yehey! evolved from being a search engine around 15 years ago to a digital marketing company today offering services such as web design and development, web management, digital public relations and reputation management, social media marketing, digital research and strategy.

The website was put up in 1998 by five graduates of Ateneo de Manila University and positioned it to be a local competitor of Yahoo! In the early 2000, however, Google started to become the most widely-used search engine and defeated Yahoo! worldwide and Yehey! in the Philippines. The Yehey! company was subsequently acquired by Vantage Equities in 2007 after a P250 million capital infusion.

Yehey Corp. booked revenues of P33.85 million in 2011, up 11% from its 2010 revenues. Net income in 2011 was P11.2 million, a turnaround from the 2010 net loss of P15.9 million.

During the first quarter of 2012, Yehey! earned gross revenues of P5 million with the company expecting to end the year with an 8% year-on-year sales growth.

Stock price to rise or fall?

Whether Yehey’s stock price will continue to rise after its first trading day remains to be seen. Two companies that also listed on the PSE by way of introduction did enjoy price spikes during their first trading days but suffered declines weeks later, although currently their prices are still way above the initial listing prices.

In September 2011, Philex Petroleum Corp. (stock code: PXP) listed by way of introduction and ended its first trading day up 617% from its initial listing price of P1.20, closing at P8.60. Its price plunged weeks later but recovered in 2012. As of October 18, 2012, PXP shares trade at P25.50 each.

Earlier this year, in May 2012, property developer Rockwell Land Corp. (stock code: ROCK) listed by way of introduction and closed at P4.90 on its first trading day, surging 236% from its listing price of P1.46. Weeks later, the stock saw its price fall consistently and as of October 18, 2012, each ROCK stock sells for P3.30.

James Ryan Jonas teaches business management, investments, and entrepreneurship at the University of the Philippines (UP). He is also the Executive Director of UP Provident Fund Inc., managing and investing P3.2 Billion ($56.4 Million) worth of retirement funds on behalf of thousands of UP employees.