Medibank Private has been on a bit of a horror run.
After a razzmatazz market debut last November where the stock first traded at $2.22 – a healthy premium to the $2.15 price for institutional investors and the $2 offered to retail buyers – the company has fallen out of favour, and today is trading at $2.05.
The fall of over 20% from its high of $2.59 in February is well in excess of the index’s fall over the same period. If it were to continue to fall another 3% from here, retail investors who bought in when the government decided to float the company would be out of pocket. Some 750,000 Australians registered interest in becoming a shareholder ahead of the IPO last year.
Here’s the chart:
Michael McCarthy, chief markets strategist at CMC Markets, said the stock was now “priced for perfection at around 20x earnings, with double digit growth estimates”, but warned that “missteps from management could result in a severe market reaction”.
The initial rally was a combination of strong demand around the offer, with another factor being the sheer size of the float meant demand from index funds. “The size of the IPO meant immediate index inclusion – and consequent ‘forced’ buying by index funds,” McCarthy said. “These two dynamics were highly supportive, and are now largely played out.”