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Sunday, November 26, 2006

Pre-IPO private placements

Just some two days back read a report that Cairn Energy's Indian arm which is planning an IPO soon, has got a portion of its to-be-issued shares placed privately, for a disclosed, of course, amount. A similar pre-IPO private placement was also there for the shares of Reliance Petroleum Ltd, with Chevron. Following this, there was also an update published in newspapers.....My doubt is, is this a really healthy trend? Coz, the price at which these placements are done is known to all (it should be) and doesn't it serve as a signal to the primary market players for the bid price in the book-building process? In other words, isn't the issuer indirectly signaling the price it wants?

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