Retail investors and the government are set to be the big winners of the Medibank Private float.
The Medibank Private share offer has surpassed expectations and raised $5.679 billion for the Federal Government which says the cash will be reinvested in job-creating infrastructure.
The level of demand from investors, both retail and institutional, was very strong.
One curious aspect of the float is that, unlike most capital raisings on the ASX, it has a two price system – one for the retail side (the “mums and dads”) and one for institutions (managed funds).
The retailers pay $2 for their shares while the institutions have to fork out $2.15. This is a nice 7.5% benefit for mums and dads.
Chris Weston, chief market strategist at IG, says the return could be much greater than 15 cents.
The shares could go as high as $2.40, he says.
“If one can offload some of the stock around here it would be a 20% profit and on current projection tied in with stretched valuations,” he says.
Not everyone will be looking to sell on the opening but it seems likely the stock will open around the $2.30 level, according to Weston.
IG’s grey market traded by clients suggests the stock will close the day at $2.23.
Danika Wright, a finance lecturer at the University of Sydney Business School, says the government encouraged more retail investors by capping the price and giving the majority to small investors.
“The IPO will see 60% of shares go to retail investors, with institutions left to compete for the remaining 40%,” Dr Wright says.
“Retail investors will also not pay more than $2 per share in the IPO which, on strong demand, has pushed the upper limit of the indicative price range to $2.30.”
She says it’s unusual to see two prices on a float.
“The reason we’re seeing it in this float is that it’s the government making the sale and so there’s a whole other element to it which is: How’s the general public going to view this?” she says.
The Medibank Private float will add good investment exposure to the health insurance industry, something which many managed funds will find attractive in terms of diversifying portfolios.
The shares, under the code MPL, open trading at midday.