The offer for "ma and pa" investors to get a slice of Mighty River Power closes today, but it will be a week before anybody knows how many people applied.
State-Owned Enterprises Minister Tony Ryall says there will be no details given about retail applications till the MRP shares take their bow on the NZX next Friday, May 10.
"Securities law prevents us from talking about demand until listing has occurred,” he said.
Before the offer opened three weeks ago some 440,000 Kiwis pre-registered interest in buying MRP shares.
However, since then the Labour/Greens proposal for a single electricity buyer has been unveiled, causing concern that the value of MRP shares could be affected. MRP had to issue a supplementary disclosure document, which warned that the value of its shares could be adversely affected by the Labour/Greens plan.
The nervousness of float organisers about how this uncertainty could affect applications from investors was demonstrated by the joint managers of the float taking the unusual step of pro-actively phoning media and giving on-the-record comment about how the float was going.
Investment banker Rob Cameron who was a key early proponent of partial privatisations and who subsequently led the Capital Markets Development taskforce was quoted today as saying he was confident there would be 100,000 applicants for shares and maybe 150,000.
At the low end of those estimates it would mean that only around a quarter of people originally registering interest had followed through to make an investment.
When the then National Government in 1999 floated off Contact Energy 225,000 Kiwis took up the opportunity to buy shares - and there were only about half as many shares available as in the MRP float.
The price of the MRP shares will be effectively decided by institutional investors, the professionals, who get to apply for shares on Tuesday and Wednesday of next week. The Government will have the final say on the price, though, as well as the final distribution of available shares.
If the final level of "ma and pa" investor interest has been as subdued as estimates of 100,000-150,000 would suggest then this leaves many more shares for the institutions and potentially for overseas investors.
“The institutions play an important role in the process," Ryall said.
"They bid for shares at the price/s they consider the company is worth, and it is a competitive process. While the final decision is made by Ministers, the bookbuild process allows us to determine what value the market puts on the company. This is important for ensuring New Zealand retail investors get a fair deal – and New Zealand taxpayers get a fair price.
“Midweek next week, Ministers assess all of the demand – from New Zealanders, from New Zealand institutions (like Kiwisaver funds and managed funds) and overseas institutions – and make decisions on the final price and allocations. The same price is paid by everyone, although New Zealanders in the retail offer will have an extra entitlement to loyalty bonus shares."
The indicative offer price range for the MRP shares has been NZ$2.35 to NZ$2.80. At the bottom of that range the offer would raise NZ$1.61 billion. At the top end the amount realised would be NZ$1.92 billion.
As of today punters putting their money where their mouths are on the iPredict prediction betting website were suggesting through their betting patterns an 84% probability that the final MRP price will be between NZ$2.35 and NZ$2.50.
3 Comments
It would be really interesting to see a breakdown of who buys these shares and how much:
National politicians
Other politicians
Others in NZ Government positions
Overseas investors, by country
NZers in the 1 %
Other NZers
"Mom and Pop" NZers (probably less than 1% of shares sold, I'd guess)
I'm fairly certain these figures could be gotten, but will they?
My point: there is no sensible relationship between pay and skill.
http://www.guardian.co.uk/commentisfree/2012/may/18/equity-capital-mark…
notes MRP and Fonterra...
"Much of investment banking is not about being a brilliant fisherman. It's about muscling into a spot on that riverbank where you can throw your net out. Getting into the money flow. Have you watched the Sopranos? Making managing director is like being made captain. Instead of a patch of New Jersey, you are given a product area where you get to collect the rent.
"Are investment bankers bothered by this? I was. That's one reason I left. I'd say many suppress it. It's a bit like insurance fraud, it can feel like victimless crime. Everyone around you is doing it. You are under enormous stress working your balls off, so it doesn't feel like easy money, either. Group dynamics are strong. Basically dissenters get trashed, or ascribed an ulterior motive for voicing opposition. It's weird how some people feel attracted to the dark side. Once they are cast as a bad guy, they relish it rather than feel guilty or troubled.
"Part of the art of ECM is creating the impression the IPO is incredibly oversubscribed; you try to generate momentum however you can. If a share was really 'hot', we'd give it to big institutional players in exchange for favours. As I said, allocating 'hot shares' is essentially giving someone money – you know the stock price will shoot up once trading starts. The favours from big players were never explicit; they would give us business on the secondary markets
Privatisations meant raising money for a government, not making an individual richer. Those privatisations would be for much lower fees by the way, made up by the prestige they brought. Most bankers argue they are oiling the wheels of the economy. Most outsiders wouldn't put it that way.
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