Units in Eagle Hospitality Trust (EHT) tumbled below their initial public offering (IPO) price of 78 US cents when they made their debut on the mainboard of the Singapore Exchange yesterday.
This comes after the trust noted that the public offer tranche of its IPO was undersubscribed amid market volatility, resulting in the joint bookrunners and underwriters having to take up the bulk of its unsubscribed stapled securities.
When the public offer closed on Wednesday, there were no applications for about 60 per cent of stapled securities, or 26.6 million, out of the 44.9 million available to the Singapore public for subscription.
This translates to a subscription rate of 0.4 times for its public offer.
A trader told The Business Times that market volatility and dipping sentiment among investors could have been the reasons that the public tranche was not filled.
The counter made its debut on the Singapore Exchange at 78 US cents at 2pm yesterday and closed at 73 US cents.
It traded in a price range of 73.5 to 78 US cents during the afternoon. Some 23.1 million shares exchanged hands, making it one of the most heavily traded counters on the bourse.
EHT is a hospitality stapled group comprising Eagle Hospitality Reit (real estate investment trust) and Eagle Hospitality Business Trust.
It has an initial portfolio of 18 full-service hotel properties, with a total of 5,420 rooms and an aggregate valuation of $1.27 billion. Most are in the 30 largest metro areas in the United States, and almost all are branded Marriott, IHG and Hilton.
The Business Times had previously reported that EHT's IPO pricing of 78 US cents a unit was lower than an earlier indicative range of 80 to 81 US cents.
One market analyst noted that while EHT's public offer being undersubscribed is "quite a disappointing outcome", it was not entirely unexpected, as the timing of its IPO is very close to that of ARA Hospitality Trust's IPO launch, resulting in fatigue in the market and among investors.
Earlier this month, ARA US Hospitality Trust priced the IPO of its 38 Hyatt select-service US hotels at 88 US cents per stapled security, and began trading on May 9. Units in the trust closed unchanged yesterday, at 86.5 US cents.
The analyst also said there might be lower visibility and understanding of EHT's underlying assets, and noted that the downward revision of EHT's IPO price "usually sends a weaker signal" to the market.
Still, Mr Salvatore Takoushian, chief executive and president of the managers, told The Business Times last week that the lower-than-indicated IPO price was meant to "attract certain investors" and offer "more potential upside" to investors.