How a late booking jammed the brakes on Trans-Cab's IPO

Singapore

THE imminent listing of Trans-Cab was turning out to be the hottest stock offering in months on the Singapore Exchange (SGX) with a story of a home-grown, family business moving up to the big league as a public-listed corporation.

But an eleventh-hour notification by the firm's insurer, First Capital Insurance, which surprised Trans-Cab with an additional premium or burning cost of S$1.83 million led to the brakes being slammed on the taxi operator's S$100 million initial public offer (IPO). The item was not flagged in the prospectus, hence potentially rendering the all-important investor document inaccurate.

"The professional advice was like this, so what can I do?" Trans-Cab chairman and chief executive Teo Kiang Ang lamented to The Business Times when contacted.

"I feel like I can't face the investors. I hoped everybody could share in our wealth. We will IPO at the correct time," said the Mandarin-speaking businessman who had spent the past week touting the firm's expansion agenda and plans to bid for the sought-after bus route contracts here.

Market watchers were left nonplussed by Trans-Cab's move on late Monday to abort the IPO, just before its slated listing on Thursday, more so as only days before, the offering drew vaunted names such as Fidelity and EastSpring Investments as cornerstone investors. Wedged between ComfortDelgro Corp and SMRT Corp, Trans-Cab is Singapore's second largest taxi operator.

It is learnt that First Capital Insurance had only last Friday informed the taxi operator of the additional billings.

Timing was a big beef. The firm's stock offering would have closed on Tuesday and balloting, if any, was scheduled a day later, making it "logistically impossible" to inform every single investor of this new item over two days.

It was for this reason that Mr Teo, under the advice of DBS - the deal's sole issue manager, bookrunner and underwriter - made the difficult decision to shelve the deal.

"I didn't know about this until last week when we got the invoice from the insurer. If we wanted to disclose this, we would have had to print everything again to support the prospectus and explain to investors all over again. There's no time. So our adviser said we should withdraw," Mr Teo revealed.

Mr Teo also categorically stated that "there is no other problem" apart from this insurance-related claim which had derailed the firm's listing plan.

What triggered the scuppering of the IPO was a letter the SGX received from a so-called whistleblower last Thursday - a day after Trans-Cab lodged its prospectus - urging the regulator to verify allegations that the company was saddled with hefty outstanding insurance debts.

That prompted a query from the SGX which in turn, led Trans-Cab and its adviser DBS to seek clarification from the insurance firm, which then confirmed that it did indeed plan to impose additional charges on the firm.

By Monday afternoon, there were signs that something was amiss when the company cancelled an earlier-scheduled briefing for analysts.

"It didn't feel right when they did that and behold, (there was) formal news in the evening," said an analyst.

The amount of S$1.83 million - a preliminary estimate by the insurer of an adjustment based on cumulative accident claims against the firm's taxi fleet - may appear digestible in relation to the net profit of about S$20 million Trans-Cab reported for the half-year ended June 2014, but it was material enough to potentially run foul of disclosure rules if the listing had gone ahead.

The reactions from the market were fast - some, less furious than others.

"My sense is that if the owner pulled the plug for a mere S$1.8 million in unforeseen claims when he's raising S$100 million, it speaks volumes of his character (compared to) others who may have decided to go ahead with the plan, citing oversight and see the stock collapse post listing," said one investor.

Others were less forgiving. "How can a company find out about extra insurance premium on the day before balloting? How can investors trust someone who can't predict the future of his own business? It's ridiculous," read a posting on a popular stock forum.