Shares in Trade Me will be offered to institutional, or professional, investors at between NZ$2.30 and NZ$2.70 each in the online auction site and classified advertising firm's highly anticipated initial public offering (IPO), The Australian Financial Review (AFR) reports.
However, in what would be a surprising move, the newspaper also suggests Trade Me's parent Fairfax Media, publisher of the AFR, will sell about 135 million shares to institutional investors and brokers with the IPO not including a portion for direct sale to retail "ma and pa" investors. It is understood that retail investors would then be able to buy shares from parcels allocated to retail share brokers in New Zealand, although it is unclear how many shares would be allocated for retail investors or whether they would be at the same price.
The IPO's lead manager, investment bank UBS, will conduct a bookbuild on November 8 and 9, the AFR says, with Trade Me's shares likely to then start trading on December 13 on both the NZX - the New Zealand sharemarket - and the Australian Securities Exchange.
A price somewhere in the NZ$2.30 to NZ$2.70 range would represent a price-earnings multiple of between 13.3 times and 15.6 times Trade Me's projected 2012 calendar year earnings before interest. tax, depreciation and amortisation (ebitda). Trade Me's June 2011 financial year ebitda rose 9% to NZ$99.2 million and a UBS report distributed to potential investors suggests it'll rise 6.3% to NZ$105.5 million in the year to June 2012.
The sharemarket float will value Trade Me at between NZ$911 million and NZ$1.07 billion with Fairfax keeping a 66% stake. The company will be chaired by former Fairfax CEO and ex-All Blacks captain David Kirk and is expected to have founder Sam Morgan, currently a Fairfax director, on its board. Fairfax will use the about NZ$300 million raised from the Trade Me IPO to reduce its A$1.49 billion of debt.
Trade Me is expected to pay out 80% of its net profit after tax in dividends.
Fairfax bought Trade Me from Morgan and other shareholders, including his father Gareth, for NZ$750 million in 2006. Trade Me has a community of 2.8 million New Zealand members. Most of its revenue comes from listing fees for general items such as clothes and electronics. About a quarter comes from listing fees for cars and property, while the rest comes from jobs listing fees, advertising and 'other' items.
(Updated with detail on retail investors expected to be able to buy shares indirectly through retail share brokers in New Zealand)