This really is the year of the IPO for Australia.
And perhaps more so for Medibank. Originally the privatization of Medibank was priced between $4.3 billion and $5.5 billion—with a share price of $1.55 to $2. Because of demand, the Federal Government has now lifted the indicative price to between $2 and $2.30.
The government explained that the “very strong demand” for the float from both domestic and offshore institutional investors was the cause of the increase in price. Stockbrokers bid $12 billion worth of shares in the first round of allocation for their clients, although only $1.5 billion worth of stock was up for grabs.
Although the government has upped the price, there will be no further alterations made to the $2 price cap set for retail investors—investors buying up to $250,000 individually. Experts expect that this particular group to pay the maximum per share.
When Medibank’s float was first launched, some analysts were unsure of whether the IPO was a good value for smaller shareholders, especially if the price hovered around $2. Investors will have to consider how much is too much ahead of the retail and institutional investment period.
There is a strong possibility that investors will be disappointed come next Tuesday, 25 November—when retail and institutional investors will find out how many shares they will receive. For how oversubscribed the broker offer was, it’s highly unlikely investors will receive all of the shares they asked for.
For a little perspective, a $2.30 share price would put Medibank’s value at $6.3 billion, nearly a billion over its originally set high-end price.
Information sourced from ABC Online.