Telecom Eireann shareholders have seen the value of their holdings rise further, with the shares rising by almost 3 per cent to close at £3.74 (€4.75) in Dublin. This left them almost 22 per cent above their £3.07 flotation price. Such has been the extent of the gains that Dr Dan McLaughlin, chief economist at ABN Amro Stockbrokers, said that it could effect the economy like a mini-budget, increasing people's wealth by hundreds of millions of pounds. This will underpin consumer spending and economic growth this year, he said.
The current Telecom share price looks set to hold at around last night's levels in the early days of next week, but brokers warn that the shares could fall back somewhat when private investors start selling their shares after receiving their share certificates or nominee account statements next week. The extent of the likely selling is impossible to judge, but given that any private investors who do trade will be almost all be selling stock - unlike the big institutions currently in the market which are buying and selling - it is likely to depress the share price level to some extent late next week.
As expected, dealings in the shares were more muted on its second day, as markets settled into "fundamental buyers and sellers" of the new stock.
In London, more than 40 million shares traded, less than a third of the 142 million traded on Thursday. In Dublin, volumes were lower, but dealers reported satisfaction with the stock's performance.
One said that a sizeable number of overseas institutions had decided to sell for a profit, cashing in at the €4.70 (£3.70) to €4.80 (£3.78) range. Irish institutions, meanwhile, are building up the stock in their portfolios. Markets, reassured by US Federal Reserve chairman, Mr Alan Green span's recent quarter-point interest rate increase, were strong. "Bearing in mind the issue price is so high, it is very, very encouraging for the Government," one dealer said. In New York, the stock was trading firmly, with its ADRs quoted at just under $19.70, which translates into almost £3.80. One ADR equals four normal shares. According to Dr McLaughlin, the total capital gain if all retail investors were to sell at yesterday's share price would be £450 million.
If this were all spent, it would boost consumption by 1.5 per cent and nominal Gross Domestic Product by 0.75 per cent.
"It is also similar to the annual total for direct tax and PRSI cuts in recent budgets and, in that respect can be viewed as a mini budget," he added.
To give £450 million back to taxpayers the Government would need to cut the standard rate of tax by about four percentage points and the top rate by seven points to 39 per cent.
He added that there was no evidence yet of any slowdown in consumer spending and the flotation would "add fuel to the high street fire", although there is no way of knowing how much would be spent and how much saved, or even how many shares would be sold.
Nevertheless, according to Dr McLaughlin, it is likely to underline bullish forecasts of real GDP growth of 10 per cent this year.
