Road to the GEM Board—the BlueEX Initial Offering

Abstract

The idea of catering to the first tech-based logistics company in Pakistan led Mr Mohammad Sohail, the CEO of Topline Securities, to decide to facilitate BlueEX’s initial offer deal. However, after signing the deal in November 2020, Mr Sohail felt slightly uneasy. BlueEX was the second stock to plunge on the newly launched Growth Enterprise Market (GEM) board of Pakistan Stock Exchange. Topline Securities partnered with Arif Habib Investments to mitigate the risk of the subject’s initial offering deal. Rigorous marketing and awareness campaigns were then undertaken, and a thorough valuation was performed. Given the one-of-its-kind business model for BlueEX, Mr Sohail, along with his initial public offering (IPO) management team, was optimistic about turning around the initial offer; however, in light of the identified risks, the stakes involved were high, and the limited history of the GEM board listings along with other market-related challenges kept him worried. The case provides an opportunity to discuss the IPO trends for small and medium enterprises (SMEs) and compare the costs and benefits of going public for SMEs. It also allows students to perform corporate valuation with an appreciation of the challenges in valuing unseasoned equity for a company with a unique business model.