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Govt says 66,000 retail investors allocated Genesis Energy shares; broker offer scaled back 20%; Bids over NZ$5,000 scaled back sharply

Govt says 66,000 retail investors allocated Genesis Energy shares; broker offer scaled back 20%; Bids over NZ$5,000 scaled back sharply

By Bernard Hickey

The Government has announced more than 68,000 retail investors have been allocated shares in the general share offer for Genesis Energy after demand was stronger than expected and forced a sharp scaling back of those who bid for more than NZ$2,500 worth of shares.

Brokers are now expecting 'stag' first day profits of more than 10%, sparking Opposition claims the Government staged a 'fire sale'.

Bids for more than NZ$5,000 had been scaled back sharply and the allocation to stock brokers had been cut 20%, Finance Minister Bill English and State Owned Enterprises Minister Tony Ryall announced.

Genesis would have the third largest share register once it listed on the NZX at 1pm tomorrow, behind Mighty River Power and Contact Energy. Meridian Energy was the fourth largest. The Government had already announced the initial public offering price of 49% of shares in the power generator and retailer at NZ$1.55 per share.

"Keen interest in the Genesis offer means scaling has been required across all investor groups including institutions. A progressive scaling policy has been applied to the general offer as part of the Government's commitment to put New Zealanders at the front of the queue for shares," the ministers said.

"This will see larger applications scaled more significantly than smaller applications. The scaling policy effectively places a cap of approximately $5,000 on all general offer applications," English said.

"Due to demand in the general offer, the broker firm offer was reduced by 20 per cent, with these shares re-allocated to the general offer," he said.

Genesis would be 88% New Zealand-owned when it listed, with the Government owning 51%,  New Zealand retail investors holding 26.7%, New Zealand institutions 10%, offshore institutions 12% and Iwi 0.3%.

Ryall said 111,000 common shareholder numbers had been issued during the share offer programme, indicating that tens of thousands of New Zealanders have become shareholders for the first time. A total of 249,000 investors invested in the four share sales, although many will have been duplicates.

Those who applied for up to NZ$2,500 of Genesis shares would receive the full 1,613 shares at NZ$1.55 per share.

Those who bid for between NZ$2,500 to NZ$5,000 would receive 1,613 shares plus 28.75% of what was applied for.

From $5,000.30 (3,226 shares) to  $40,650.30 (26,226 shares), investors would receive NZ$3,217.80 (2,076 shares) plus 5% of what was applied for beyond NZ$5,000.30.

For those who bid for NZ$40,650.30 (26,226 shares) and above, they would receive NZ$5,000.30 (3,226 shares).

Political reaction

Labour SOE spokesman Clayton Cosgrove described the share sale process as a "a massive bonfire of a fire sale."

“Just 68,000 Kiwis bought shares in Genesis, little more than 1 per cent of New Zealanders. This is despite massive taxpayer lolly bags to convince them to buy in. The Government is trying to claim 68,000 is a success but it is just 5,000 more than the failed sale of Meridian attracted," Cosgrove said.

“National spent hundreds of millions of dollars on lawyers, accountants, advertising agencies, financial institutions, bonus schemes and public relations. This is the most scandalous waste of money on state assets since Think Big," Cosgrove said.

“The Government should apologise to New Zealanders for selling off their assets at the political equivalent of a garage sale."

(Updated with more detail, reaction)

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Scaling mum and dad down to 5K to line the pockets of investment bankers = epic fail for the Nats.
They have just lost my vote in 2014.

Who will you be voting for Hane,Winston or Cunliffe.would either run the country any better than Key? Would you decide whom you would vote for because of this one issue?

You forgot Norman, who seems by far the most effective oposition at the moment and has more support than Winston and Hone combined.
You starting to get a bit worried that National are starting to show a few cracks?

bit esoteric but Ive suffered enough fools and big heads this week to last the rest of the month!....if not 3.
(and not in here!)

If you try and think of this as a comment on the bigger picture then maybe you'll have your answer.

Yes not happy. Applied for $20k and get nowhere near that. I would have applied for half under my partner's name had I known it was going to be a rort for the big boys. 
What a shameful fire sale. How many votes will this lose National? Fodder for labour all the way to the election. 

People will soon forget this. Many are doing well at the moment especially Auckland home owners.

WTH offshore institutions owning 12%.

And remember 12% ownership is 24% of the shares on offer.
And the dividends for these that previously stayed in NZ will now be going offshore.

Agreed. I got only 13% of shares applied for versus 86% for a Merdian for a similar application amount. Have a look on the sharetrader forum here to see the reactions.
Letting the big institutions get the lion's share will be a vote loser for sure

Oh dear. So they over priced the first 2 floats but finally price one right (time will tell) and give the back hander to the institutions?

I know for a fact brokers are looking after clients who support them. Why would they look after people who trade on the internet or people whom they have never dealt with before this float. 

You mean mum and dad investors? Yes, why look after them...

It is up to the government to look after the mums and dads, not the brokers who need to look after those investors who are loyal to them. This was a good time to be a loyal client, not a person who uses the internet to trade shares. People who use the internet for trading are very short sighted as it does not build relationships with people who can look after you.

I went through the Genesis Energy Share offer website, like most mum and dad investors (or mugs as we should be called). Why should I have to use a broker? This was a state asset being flogged off not a private entity. Mum and Dads should have had first right of refusal and then the corpirates get whats left over. 
I will get $5k of shares, 1/4 of what I applied for. While the big boysl get millions of dollars worth. Good on them of course looking after number one. But the Government looking after mum and dad? Yeah right.

Most of the mums and dads some of whom will be getting into shares for the first time probably got what they wanted. About $5000 or less. Brokers got a lot less shares than they bid for. Most of the so called corporate shares have in fact been allocated by brokers to experienced investors who the brokers have built up a relationship with. They also will be disappointed as many of them have not got the numbers they wanted. They will also be in the market today buying more shares just like the mums and dads. Many corporates will be allocating their shares to kiwisaver accounts and superannuation accounts and will therefore benefit the mums and dads in those accounts. Some mums and dads will stag their shares today whereas the so called corporates will hold onto them for their clients in their kiwisaver accounts.

Actually, it just occured to me that the action of scaling back heavily the allocation, will surely ensure a 'succesful' float. Instant buyer demand = price going in the right direction for the government.

Mighty River and Meridian both up quite strongly this morning , presumably in anticipation of a strong debut from Genesis, which will enable investors to rate the whole sector ( including contact, infratil and Trustpower) on a PE basis. Also some of the money returned from Genesis applications likely to find its way into the other power companies if they now look cheap.
Meridian has been quite good. At 1.17 and have already had a dividend.
The problem Labour have with this issue is they cant get their story straight. They dont know whether to castigate the Government for charging too much ( MRP ) not getting enough investors ( Meridian ) or not charging enough ( Genesis ) when the reason the whole process has been so difficult is because they introduced the political uncertainty. They have to concede they have cost the taxpayer billions.