Morningstar’s well respected head of Equities research, Peter Warnes, is out with a scathing report on the tactics being employed by the government and its advisers to extract the best price from the market with the Medibank Private Float.
Warnes says the problem is that retail investors have to have their bids for stock in two weeks before institutional investors if they are bidding through sponsoring brokers, even though the institutional, and hence total, price is not being settled until November 20.
I do not believe demand for the issue is a problem – the problem, as with most bookbuilds, is the uncertainty around the price – especially when retail investors are treated like mushrooms, kept in the dark and fed you know what by investment bankers.
Warnes takes particular aim at the price guidance of $1.55 a share to $2.00 a share – “a mere 29 per cent spread”. Imagine going to the bank and asking for Aussie dollars and being told the price is somewhere between 75 cents and 100 cents to the USD but you won’t know until the big guys have set the price.
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