Cebu Pacific IPO: CEB flies 6% on first trading day

James Ryan Jonas

After deferring the planned Initial Public Offering (IPO) twice, it’s now all systems go for Cebu Pacific (CEB) to issue its shares to the public.

In a statement submitted to the Philippine Stock Exchange (PSE), Philippine budget airline Cebu Pacific said it will list its shares on the exchange starting October 26.

Although the offer price is yet to be determined and will only be announced on October 8,  the carrier said the price will be no more than P150.00.

According to the company, the maximum price has been set high to allow flexibility in final pricing. Analysts are saying, however, that the stock is overpriced if the company decides to offer at this high-end price.

Cebu Air Inc.  is expected to raise up to P32.2 billion ($730 million) from the IPO, with the proceeds to be used to purchase additional aircrafts in a bid to compete with other budget airlines in the region, like Singapore’s Tiger Airways and Malaysia’s AirAsia.

The company initially planned an IPO in 2008, but decided to defer it due to the global financial crisis. It then considered a listing in March 2010, but again postponed it due to the May national elections.

Update September 24, 2010: In a new disclosure submitted to the PSE, the company said the indicative offer price for the shares will range from P110.00 to P135.00. The final offer price will be announced after the completion of the book building.

Update October 8, 2010: Cebu Pacific announced that it has priced its offered shares at P125.00 each. The company is expected to issue as many as 214.63 million shares to the public, raising as much as P26.8 billion. The IPO shares include 30.66 million primary shares, 155.97 million secondary shares, and an additional 27.99 million shares for over-allotment in the event of of strong demand. The PSE listing date will be on October 26.

Update October 26, 2010: Shares of budget carrier Cebu Air Inc. or Cebu Pacific (CEB) rose 6.4% on its first trading day, closing at P133.00 from its IPO price of P125.00. The initial public offering is touted as the largest Philippine IPO since 2005. The company sold 186.6 million shares, representing 30.4% of total outstanding shares, and raised more than P23.3 billion.

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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.