Prime US Reit's IPO structured to minimise risks amid uncertainty

THE subscription results of Prime US Reit and its choice of offering structure in its initial public offering (IPO) earlier this month show the issuer's and bankers' caution in the wake of dismal results from Eagle Hospitality Trust's public offer, which was only 0.4 times subscribed.

Firstly, Prime US Reit's sponsor and entities related to the Reit's manager had to beef up their stakes to help fill the placement tranche; secondly, the bankers had selected a relatively uncommon offering structure that allowed the retail and placement tranches to overlap and open for subscription concurrently.

A concurrent offering is less common than a sequential offering, under which the retail tranche opens for subscription only after the placement tranche has closed, and units have been allocated to institutions and high-net-worth individuals.