INITIAL PUBLIC OFFERS OF STATUTORY BOARDS (Adoption of less disruptive method for allocation of shares)

Dr Toh Keng Kiat asked the Minister for Communications whether a less disruptive method will be adopted for future allocation of shares in the initial public offers of statutory boards, including a step-by-step education on electronic share application on television and video demonstrations in community centres.

Mr Mah Bow Tan: Mr Speaker, Sir, the Government adopted various measures to facilitate a smooth initial public offering (IPO) of Singapore Telecom shares.

Firstly, there was an extensive publicity campaign which began five months before the IPO. The Stock Exchange of Singapore (SES) and the banks organised a series of share investment seminars to educate the public on the mechanics of share investment. This was reinforced by the "Invest Singapore" publicity campaign, which included mobile exhibitions to 15 community centres all over the island to educate the public on the risks and benefits, as well as the procedures of share investment. The banks and the Stock Exchange of Singapore were also present at these exhibitions to facilitate the opening of CPF investment accounts and CDP accounts.

Secondly, the Government simplified the application and selling procedures for Group A shares. An offer letter was sent to all eligible Singaporeans who merely had to sign and return the form in order to apply for Group A shares. The fact that 1.45 million Singaporeans, or more than 85% of all eligible Singaporeans, applied for Group A shares with minimum hassle indicates that the simplified application procedures for Group A shares were effective

Unlike Group A shares, Group B shares were fixed-price shares with no discount or loyalty shares, similar to those offered in the fixed-price tranche of other IPOs. There are established application procedures for such shares. These shares were meant to cater for those Singaporeans who wanted some more Singapore Telecom shares. The anticipated target group was the existing share investors, who already have trading accounts with their brokers and CDP accounts, as well as new investors who are serious enough to learn and follow the established procedures.

Response to Group B shares was unexpectedly overwhelming. Furthermore, many Singaporeans waited till the last moment to open the necessary accounts, despite the early publicity for the listing. The result was long queues at the CDP and the CPF agent banks. SES then simplified application procedures so that those using cash need not open CDP accounts, and those using CPF funds need not explicitly transfer funds from the CPF Ordinary Accounts to their investment accounts. Unfortunately, before we could implement these changes, some minor incidents of unruly crowd behaviour occurred at the CDP and CPF agent banks. Once the changes were implemented, the queues disappeared.

We also anticipated a rush of people wanting to sell ST shares when trading began. We therefore made arrangements for Singaporeans to sell Group A and B shares at designated bank branches as well as at stockbroking offices and simplified the procedures for doing so. As matters turned out, these arrangements were more than adequate. There were no queues or delays, and everything went on smoothly.

Sir, ST was the largest IPO ever on the SES. Its listing was not only a financial exercise, but also a political one to distribute share ownership among as many citizens as possible. Overnight, the number of shareholders in Singapore has increased more than three-fold, from about 400,000 to over 1.4 million. Despite this, overall, the operation proceeded extremely smoothly. Credit for this is due to the banks, SES, the CPF Board, ST itself, as well as the many Government departments which helped to coordinate and execute the operation. Their staff worked long hours to make everything ready and to service the public. The Government thanks them for all their invaluable contributions, without which the exercise would not have been possible.

The Government will study the lessons learnt from this first IPO of a privatised statutory board, including Dr Toh's suggestion of a more comprehensive education on electronic share application procedures. Nevertheless, the fact that so many Singaporeans have been involved in this exercise will, to a large extent, ensure a smoother implementation the next time round.

Mr Heng Chiang Meng (Cheng San GRC): Sir, may I ask the Minister whether the Government would consider an opt-out system or scheme for future IPOs? If the answer is affirmative, may I further ask the Minister how the Government would tackle (1) the legal issues relating to such a scheme and (2) the political odium of such a system should the share price upon listing be lower than the issued price since the scheme works on the basis of a passive acceptance.

Mr Mah Bow Tan: Sir, an opt-out scheme was one of the options considered in the Singapore Telecom IPO. But the Government decided on an opt-in scheme instead. The decision to invest should be one made by the individual, not by Government. Government can explain the benefits of long-term share ownership. Government can make the procedures as simple and as convenient as possible, but it is up to the individual to decide whether he wants to invest in Singapore Telecom shares or not. An opt-in scheme requires the individual to make such a conscious and deliberate decision. An opt-out scheme does not.

We are prepared to consider an opt-out scheme for future privatisations if the experience of the Singapore Telecom exercise had shown that the opt-in scheme that we adopted was too cumbersome, or discouraged too many Singaporeans from taking up the Singapore Telecom Group A shares. However, this did not happen. Of the over 1.6 million forms that we sent out, 1.45 million Singaporeans applied for and were allocated Group A shares, as I mentioned earlier. As a result of the simplified and convenient procedures for application, the whole exercise proceeded smoothly. So the Government will continue to use the opt-in scheme for future privatisation exercises.

Dr Toh Keng Kiat (Nominated Member): Sir, is the Minister aware that there were complaints by some successful applicants for the Group C tranche that there was a delay in the confirmation of these shares which caused them to lose the opportunity of being able to trade in the shares on the first trading day?

Mr Mah Bow Tan: Mr Speaker, Sir, I believe there were some complaints of this nature. But again, as I said, this was a massive exercise. It was a very large exercise. There were many people involved and I think the processing of all the various tranches of shares was done as quickly as possible. Staff involved in the banks, CPF and SES worked through the night to try and get the results out as quickly as possible. Under the circumstances, I am sure that there were some people who might have been left out or were informed late about their allocation of shares. But I believe that these matters were being handled by the agent banks as expeditiously as possible.