INSURER Promina will announce the final price tomorrow for its initial public offer for which the institutional book build closed last night amid speculation the issue had been targeted by hedgefunds.
Promina, which is made up of the Australian and New Zealand assets of British-based Royal and SunAlliance will list on both sides of the Tasman on Monday.
Promina gave institutions an indicative bidding range of A$1.50 (NZ$1.67) to A$2 a share giving the company a value of up to A$2.1 billion.
Retail investors who subscribed for shares last month, will pay A10c less than the final price set by the book build.
Reports in Australia suggested that the Promina book build had been fully subscribed at up to A$1.80, much higher than expected.
Analysts had said the institutions would bid at the low end of the range because Royal and SunAlliance was a distressed seller of the business, fund managers did not need to buy the stock to gain exposure to the general insurance market, and AMP’s surprise capital raising for A$1.5 billion.
However, a more than 20 per cent increase in the share price of Royal and SunAlliance this week has fuelled speculation that hedge funds have targeted the float to make a quick profit.
Market sources said the Royal and SunAlliance price movement and the higher-than-expected bid price for Promina had the hallmarks of a hedge fund play. Hedge funds would have bought Royal and SunAlliance shares earlier in the week and subscribed for Promina stock at a high price when the book build opened on Wednesday. Bidders for Promina did not have to commit to buying the stock till the book build closed last night.
The high bid price for Promina would have caused the Royal and SunAlliance share price to rise in anticipation of a more successful than expected float of Promina. However, just before the Promina book-build closes, the hedge funds pull their bids out and take a 20 per cent profit on Royal and SunAlliance.
An analyst said yesterday that if this was the case, it remained to be seen if institutions would stick to their guns and bid low for Promina, or if they bid high to ensure they received stock.
If the hedge funds did take a significant amount of Promina stock, they could drive the price up when it listed and institutions did not get enough, or, if there was no demand, the price could plunge as the funds sought to dump the shares.
AMP also became a victim of hedge funds this week. The funds drove AMP’s share price to record lows after massive short selling after the stock resumed trading on Monday.
AMP had halted trading in its shares last Thursday, immediately before announcing it would demerge its troubled British business and raise new capital.
The share price fell again in early trading yesterday, but recovered some losses later. AMP shares closed at $5.76 down 8c, and compared with $9.80 before the trading halt.
Promina will be the first dual primary listed stock on the New Zealand Stock Exchange and would comply with its listing rules and those of the Australian Stock Exchange.
The stock would list at 2pm on Monday with the issuer code PMN.
